*816 Birkett v Hayes and Another

1976 B. No. 169

Court of Appeal

18 March 1982

[1982] 1 W.L.R. 816

Lord Denning M.R. , Eveleigh and Watkins L.JJ.

1982 Feb. 8, 9, 10; March 18

Interest—Award of damages—Personal injury cases—Sum for pain, suffering and loss of amenities—Appropriate rate of interest on award

In an action for negligence in respect of personal injuries suffered as a result of a road accident, the plaintiff was awarded damages, after a reduction of 25 per cent. because she had not been wearing a seat belt at the time of the collision, of £224,747. The total award included a sum of £30,000 for pain and suffering and loss of amenities, with interest from the date of service of the writ to the date of trial, a period of 4 2/3 years, at the rate of interest of the short term investment account, which amounted to over £16,000, subsequently reduced by 25 per cent.

On appeal by the first defendant against the award of interest: —

Held, allowing the appeal, that since the award of general damages was calculated taking into account the effect of inflation during the period from the date of service of the writ until the date of trial, interest awarded on those damages to compensate the plaintiff for being kept out of the capital *817 sum during that period should be low to avoid injustice to the defendant by over-compensating the plaintiff; that interest at 2 per cent. was the appropriate rate and should be regarded as a guideline for the rate for interest on general damages in personal injury cases in future (post, pp. 820E, H — 821A, C–E, 822G–H, 823D–E, 824H — 825B).

Pickett v. British Rail Engineering Ltd. [1980] A.C. 136, H.L.(E.). applied .

Jefford v. Gee [1970] 2 Q.B. 130, C.A. and Cookson v. Knowles [1977] Q.B. 913, C.A. ; [1979] A.C. 556, H.L.(E.) considered .

Per curiam . In deciding the period for which interest should be awarded all the circumstances of the case should be taken into account. Where, for instance, the plaintiff was responsible for unjustifiable delay in bringing the action to trial, interest for a period shorter than the time from the date of service of the writ to the date of trial should be awarded (post, p. 825A–B, D–G).

Order of Michael Davies J. varied.

The following cases are referred to in the judgments:

• British Transport Commission v. Gourley [1956] A.C. 185; [1956] 2 W.L.R. 41; [1955] 3 All E.R. 796, H.L.(E.) .
• Cookson v. Knowles [1977] Q.B. 913; [1977] 3 W.L.R. 279; [1977] 2 All E.R. 820, C.A. ; [1979] A.C. 556; [1978] 2 W.L.R. 978; [1978] 2 All E.R. 604, H.L.(E.) .
• Jefford v. Gee [1970] 2 Q.B. 130; [1970] 2 W.L.R. 702; [1970] 1 All E.R. 1202, C.A.
• London, Chatham and Dover Railway Co. v. South Eastern Railway Co. [1893] A.C. 429, H.L.(E.) .
• Pickett v. British Rail Engineering Ltd. [1980] A.C. 136; [1978] 3 W.L.R. 955; [1979] 1 All E.R. 774, H.L.(E.) .

The following additional cases were cited in argument:

• Cremer v. General Carriers S.A. [1974] 1 W.L.R. 341; [1974] 1 All E.R. 1 .
• Funabashi, The [1972] 1 W.L.R. 666; [1972] 2 All E.R. 181 .
• Lim Poh Choo v. Camden and Islington Area Health Authority [1980] A.C. 174; [1979] 3 W.L.R. 44; [1979] 2 All E.R. 910, H.L.(E.) .
• Mason v. Harman [1972] R.T.R. 1 .
• Miliangos v. George Frank (Textiles) Ltd. (No. 2) [1977] Q.B. 489; [1976] 3 W.L.R. 477; [1976] 3 All E.R. 599 .
• Roberts, In re (1880) 14 Ch.D. 49 .
• Walker v. John McLean & Sons Ltd. [1979] 1 W.L.R. 760; [1979] 2 All E.R. 965, C.A.

APPEAL from Michael Davies. J.

The first defendant, Brian Hayes, appealed against the award of interest on general damages to the plaintiff, Sandra Elizabeth Birkett, in an action in which she claimed damages for negligence in respect of personal injuries sustained in a road accident. The trial judge awarded interest at the short term investment account rate for the period from the date of service of the writ to the date of trial. The grounds of the appeal were that the guideline for the awarding of interest laid down in Jefford v. Gee [1970] 2 Q.B. 130 was not appropriate in the economic conditions currently prevailing and should be changed; that where general damages were awarded on the scale for figures current at the date of trial interest should be awarded at a rate appropriate to times of stable currency; and that an award of interest on general damages at*818 rates of interest currently prevailing did not provide fair compensation for the plaintiff but over-compensated the plaintiff and penalised the defendant.

The facts are stated in the judgment of Lord Denning M.R.

Representation

• Piers Ashworth Q.C. and Peter Ripman for the first defendant.
• Mark Potter Q.C. and Michael Baker for the plaintiff.

Cur. adv. vult.

LORD DENNING M.R.

March 18. The following judgments were read.

It was a tragic accident. It happened on February 23, 1975. The plaintiff was in the passenger seat. Her husband was driving. She was not wearing her seat belt. There was a collision with another car. She was thrown forward and upward. She received a devastating head injury. Her brain suffered a grave and profound shock. She has ever since been in hospitals or in homes. It has left her with a “behaviour disorder.” Whereas before the accident she was exceptionally able, intelligent and attractive, now she behaves so strangely that she needs constant attention. She tires out everyone who tries to look after her.

On May 10, 1976. the plaintiff by her next friend issued a writ claiming damages for negligence. The action did not come on for trial for 4½ years. The judge was Michael Davies J. He gave judgment on January 19, 1981. He assessed the total damages as £299,663, but he reduced them by 25 per cent. because she was not wearing her seat belt, thus giving judgment for £224,747. No question has arisen on that award except as to one item. That is as to the damages for pain and suffering and loss of amenities. The judge said of it:

“The plaintiff’s life has been virtually ruined; and she knows it. Apart from her disability, including the loss of the enjoyment of her work and most of the pleasurable activities of life, she has lost her happy marriage — and I repeat, she knows it. At my invitation counsel suggested what the bracket should be. Mr. Potter submits £25,000 to £30,000; Mr. Ashworth submits £20,000 to £30,000. In my judgment this is clearly a case for an award at the top of the bracket, and I award the sum of £30,000.”

In addition, the judge awarded interest on that sum of £30,000. He awarded it from the date of the service of the writ, May 10, 1976, to the date of trial, January 19, 1981. That is, for 4 2/3; years. He took the rate of interest allowed by the court on short term investment account — that may be 9 per cent. or 10 per cent. or even more. It came to over £16,000. That is, in all, £30,000 plus £16,000. Reduced, of course, by 25 per cent. to £12,000, as she was not wearing a seat belt.

The guidelines in Jefford v. Gee

The question in this case is as to that award of interest of £16,000. In Jefford v. Gee [1970] 2 Q.B. 130 we gave a guideline as to the interest on the item for pain and suffering and loss of amenities. We said that it should be awarded from the date of the service of the writ until the date of trial. This is what I said, speaking for the court, at p. 147: *819

“In the words of Lord Herschell in London, Chatham and Dover Railway Co. v. South Eastern Railway Co. [1893] A.C. 429 , 437, interest should be awarded ‘from the time of action brought at all events.’ From that time onwards it can properly be said that the plaintiff has been out of the whole sum and the defendant has had the benefit of it. Speaking generally, therefore, we think that interest on this item (pain and suffering and loss of amenities) should run from the date of service of the writ to the date of trial.”

Looking back at it now, I feel that guideline was an error. It treats the item (for pain, suffering and loss of amenities) as accruing due at the date of service of the writ: whereas it does not. It is more like the item for cost of future care or for loss of future earnings in which interest only runs from the date of trial. But still the guideline has stood since 1971, and, as I will show, it is now too late to alter it.

Meanwhile, however, we made an attempt to alter it. It was in Cookson v. Knowles [1977] Q.B. 913 .

The alteration in Cookson v. Knowles

In the succeeding years we met with racing in flation. So in Cookson v. Knowles [1977] Q.B. 913 in one single judgment we altered the guideline. I said, at p. 921:

“The plaintiff thus stands to gain by the delay in bringing the case to trial. He ought not to gain still more by having interest from the date of service of the writ. We would alter the guideline, therefore, by suggesting that no interest should be awarded on the lump sum awarded at the trial for pain and suffering and loss of amenities.”

That judgment was given on July 29, 1977. Our view was given immense support by the Report of the Royal Commission on Civil Liability and Compensation for Personal Injury (Cmnd. 7054) eight months later, in March 1978. The reasoning (c. 16, paras. 747 and 748) is so compelling that I venture to set it out in full:

“Nevertheless, we agree with the Law Commission’s conclusion, and with the rule in Cookson v. Knowles , that no interest should be awarded on non-pecuniary damages. As we have pointed out elsewhere, in present economic conditions an investor may well be unable to do more than maintain the real value of his investment, once tax and inflation are taken into account, if indeed he can manage to do this. To award no interest on non-pecuniary damages may therefore be at least as favourable as the award of interest at a market rate on damages for past pecuniary loss. A more important justification, however, lies in the conventional nature of non-pecuniary damages. We do not think that it would be appropriate to subject essentially arbitrary figures to detailed financial calculations. If an attempt were to be made, allowance would have to be made for inflation in selecting the appropriate interest rate. It would also, strictly speaking, be necessary to apply interest at the half rate only to that part of the damages relating to non-pecuniary loss before trial, assessed on the scale current at the date of injury. This would all be highly artificial.

“We recommend that the rule in Cookson v. Knowles that no interest should be awarded on damages for non-pecuniary loss should stand; and that it should be applied in Scotland and Northern Ireland.”

*820

Cookson v. Knowles was taken to the House of Lords , but no view was expressed on this point: see [1979] A.C. 556 , 573 per Lord Diplock:

“The question of damages for non-economic loss which bulks large in personal injury actions, however, does not arise in the instant case. It has not been argued before your Lordships and I refrain from expressing any view about it.”

The overruling of Cookson v. Knowles

In Pickett v. British Rail Engineering Ltd. [1980] A.C. 136 the House of Lords did consider the point. They overruledCookson v. Knowles . In doing so they made no mention of the Report of the Royal Commission or the reasoning in it. In deference to the decision of the House of Lords in Pickett v. British Rail Engineering Ltd. [1980] A.C. 136 , Mr. Ashworth felt bound to concede that we were bound to give some interest on the award of damages for pain and suffering and loss of amenities. But he contended that we were free to determine what should be the rate of interest. He pointed to one or two indications that this might be varied according to the circumstances of the case. In Cookson v. Knowles [1979] A.C. 556 , 579E–F, Lord Scarman said it might depend on “currently prevailing financial conditions.” And the Royal Commission said, in paragraph 747, that “allowance would have to be made for inflation in selecting the appropriate interest rate.” I turn, therefore, to consider the relevant considerations on this point.

The method of assessment

The important thing to notice is that the judge assessed the figure of £30,000 (for pain and suffering and loss of amenities) on the value of money at the date of the trial on January 19, 1981 — and on the plaintiff’s condition at that date. Everyone accepted that this was the right way of doing it. The figure for pain, suffering and loss of amenities is always assessed at the date of the trial. The judge then has before him the full story up to that date, and the outlook for the future. This plaintiff’s condition may have deteriorated more than expected, or it may have improved. The judge has to award compensation for the past, and also for the future pain, suffering and loss of amenities. The future that lies ahead, beyond the date of trial, is often of more consequence than the past. The judge awards a lump sum at the date of trial to cover all.

Apart from inflation

If the currency had remained stable from 1976 to 1981, and the plaintiff’s condition had remained unchanged, neither improved nor deteriorated, I should have thought that the award in 1976 would have been — not £30,000 — but only £20,000, or thereabouts. I can see no reason why that £20,000 should be any different from a contract debt. Suppose that the plaintiff was owed a debt of £20,000 due in May 1976, but judgment was only given in January 1981. The plaintiff would get interest only on £20,000 for those 4 2/3 years. The interest would have been about £8,000. She would only have got £28,000 at the trial. She would not get £30,000.

The effect of inflation

But the currency did not remain stable from 1976 to 1981. There was racing inflation. So that the plaintiff in 1981 received £30,000. I can see no *821 possible justification for giving her interest on that inflated figure for the 423 years — when she would not be given it on an admitted debt of £20,000 due at the date of the service of the writ. Taking Lord Herschell’s words: she was not kept out of £30,000 for those 423 years. She was only kept out of £20,000. Nor did the defendants get the benefit of the use of £20,000.

The effect of tax

Even if she is to be regarded as having been kept out of £30,000 from the date of the service of the writ (May 10, 1976) she may — or may not — have invested it on short term investment account. If she had invested it, she would have had to pay tax on the interest she received from it. But now, if interest is awarded her on £30,000 from the date of the service of the writ, for 4 2/3 years, she gets the interest without deduction of tax and without having to pay tax on it. Alternatively, she might not have invested it, but spent it in other ways. In that case she would have got no interest at all.

Conclusion

All these considerations convince me that, if interest is to be awarded from the date of the service of the writ (as Pickett’s case [1980] A.C. 136 compels), then that interest should be very low indeed. There is nothing to guide us but the feeling of what is fair. You must remember that she is getting the £30,000 assessed at the date of trial, and also she is getting interest on it over the preceding 4 2/3 years. Having discussed it with my brethren, I would Put the interest at 2 per cent. and recommend it as a guideline for future cases.

EVELEIGH L.J.

Section 3 (1) of the Law Reform (Miscellaneous Provisions) Act 1934 reads:

“In any proceeding tried in any court of record for the recovery of any debt or damages, the court may, if it thinks fit, order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of the debt or damages for the whole or any part of the period between the date when the cause of action arose and the date of the judgment: … “

Section 3 (lA) of the Law Reform (Miscellaneous Provisions) Act 1934 (as inserted by section 22 of the Administration of Justice Act 1969 ) provides:

“… the court shall exercise that power so as to include in that sum” (i.e. the judgment for damages) “interest on those damages or on such part of them as the court considers appropriate, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.”

In Jefford v. Gee [1970] 2 Q.B. 130 the Court of Appeal laid down guidelines as to the appropriate rate of interest and in so far as damages for Pain and suffering and loss of amenities was concerned, that rate was said to be the rate allowed by the court on the short term investment account, taken as an average over the period for which interest is awarded. That period in relation to such general damages was held to be from the date of service of the writ to the date of trial.

In Cookson v. Knowles [1977] Q.B. 913 in relation to Jefford v. Gee *822

[1970] 2 Q.B. 130 Lord Denning M.R. said, at p. 921C: “At that time inflation did not stare us in the face. We had not in mind continuing inflation and its effects on awards.” He went on to say that as awards were assessed on the current value of money as at the date of judgment the plaintiff would receive a larger sum than he would have done at the date of the writ and said, at p. 921D:

“We would alter the guideline, therefore, by suggesting that no interest should be awarded on the lump sum awarded at the trial for pain and suffering and loss of amenities.”

However, in Pickett v. British Rail Engineering Ltd). [1980] A.C. 136, the House of Lords held that as interest on general damages was awarded for the purpose of compensating a plaintiff for being kept out of the capital sum between the date of the service of the writ and judgment the Court of Appeal erred in not awarding such interest and the order of the trial judge should be restored. It is therefore clear in the present case that the plaintiff was entitled to interest, for there were no special reasons why it should not be given. The change in the value of money was not a special reason, for it affected everyone alike.

In Pickett’s case [1980] A.C. 136 the argument was concerned only with the question whether interest was recoverable. Concentrating as they did upon this vital issue, counsel had agreed the rate of interest between themselves. The House of Lords did not consider it. Consequently, while in the present case there is an entitlement to interest, that rate is such “as the court considers appropriate.” What is appropriate must be determined in the light of all the relevant circumstances at the date of the trial.

While inflation does not amount to a special reason for the court to refuse to award interest, it does not follow that the inflationary element which exists in the relevant current interest rates is not a factor to consider when determining the appropriate rate of interest.

In Pickett’s case Lord Wilberforce said, at p. 151:

“Increase for inflation is designed to preserve the ‘real’ value of money: interest to compensate for being kept out of that ‘real’ value. The one has no relation to the other. If the damages claimed remained, nominally, the same, because there was no inflation, interest would normally be given. The same should follow if the damages remain in real terms the same.”

Lord Wilberforce is saying that the two objectives are separate, but he does not say that current rates of interest have no relation to inflation. Moreover, he does not say what the compensatory rate of interest shall be.

It cannot be disputed that current rates of interest today have a large inflationary element. This element was adverted to in Cookson v. Knowles [1979] A.C. 556 , where Lord Diplock said, at p. 571: “Inflation is taken care of in a rough and ready way by the higher rates of interest obtainable as one of the consequences of it …” If damages were assessed on the basis of the value of the pound at the date of the writ, then there would be an overwhelming case for the award of interest at rates which carry an inflationary element. Such rates would seek, albeit imperfectly, to achieve two objects, namely to preserve the value of the award and to compensate for the late receipt of the money. In my opinion, however, it cannot be right to apply such interest rates to an award which already takes into account the need for preserving the value of money. We must look for some other rate of interest.

*823

There have been various statements giving reasons for the award of interest. In many we find a reference to the defendant wrongfully withholding the money from the plaintiff. Thus in London, Chatham and Dover Railway Co. v. South Eastern Railway Co. [1893] A.C. 429 , 437 Lord Herschell, L.C. said:

“… I think that when money is owing from one party to another and that other is driven to have recourse to legal proceedings in order to recover the amount due to him, the party who is wrongfully withholding the money from the other ought not in justice to benefit by having that money in his possession and enjoying the use of it, when the money ought to be in the possession of the other party who is entitled to its use.”

However, I do not think it is right in determining the rate of interest to proceed upon the basis that a defendant should be penalised. Indeed, I do not understand Lord Herschell to be suggesting this. There are many cases where the plaintiff does not wish to have his damages assessed as quickly as possible. The medical reports may be uncertain. His prospect of employment may be difficult to determine. There are a number of reasons where neither side is anxious to proceed expeditiously. On the other hand, it is fair to say that the plaintiff has not had the money, while the defendant has had the advantage of not having been compelled to pay. It seems to me that we should seek to discover a rate of interest which will compensate the plaintiff in recognition of the fact that a sum of money in respect of general damages should be considered, over the relevant period, as existing for his benefit.

That sum of money might have been thought to be the value of the award at the date of the writ with interest rates which counter inflation or the value at the date of the judgment with interest rates less the counter-inflationary element. However, Pickett’s case [1980] A.C. 136 tells us that it is upon the award at the date of judgment that interest must be based and therefore the lower rate of interest is appropriate.

In Cookson v. Knowles [1979] A.C. 556 Lord Diplock in relation to the calculation of fatal accident damages said, at p. 571:

“In times of stable currency the multipliers that were used by judges were appropriate to interest rates of 4 per cent. to 5 per cent. whether the judges using them were conscious of this or not.”

The Judgments Act 1838 , now repealed, provided for interest at 4 Per cent. At the time of Jefford v. Gee [1970] 2 Q.B. 130the court regarded 6½per cent. as appropriate. In retrospect one can discern the early signs of inflation. I therefore think that we should start by assuming a true earnings rate of interest of 4 per cent.

At the time that Jefford v. Gee [1970] 2 Q.B. 130 was decided an award of interest was taxable in the hands of the plaintiff. The Finance Act 1971 removed the liability for tax. In British Transport Commission v. Gourley [1956] A.C. 185 it was held that in assessing damages for loss of earnings the plaintiff’s liability for tax on those earnings should be taken into account. In awarding interest on general damages at a true earnings rate, we are seeking to compensate the plaintiff for the loss of the money which his award could have earned. This would indicate that the principle in Gourley’s case [1956] A.C. 185 should apply. On the other hand, the sums payable as interest will be relatively small and it will generally be *824 undesirable to add to the expense of litigation by seeking to achieve a precise determination of the plaintiff’s actual loss. Most plaintiffs will be paying tax at the basic rate. Some would not have invested the money at all. Others might have skilfully used it in interest free stock.

In awarding interest the judge is exercising a discretion. In the great majority of cases the plaintiff could have proceeded with greater dispatch; and yet it may well be wrong to deprive him of interest particularly as the defendant will have had the use of the money. I therefore think that we should approach this matter upon the basis that the court should arrive at a final figure which will be fair, generally speaking, to both parties.

It is not a fair basis upon which to award interest to assume that the defendant should have paid the proper sum (and this means the exact sum) at the moment of service of the writ. It is true that he must be paid some interest from that date because a sum of money was due to him. Unlike the case of a claim for a fixed money debt, no one can say exactly how much. The plaintiff does not have to quantify his demand and yet in most cases he is in the best position to evaluate his claim. The defendant may not have the material upon which to do so. He may not have had the necessary opportunity for medical examination. The plaintiff may not have given sufficient details of his injuries for anything like an estimate, as opposed to a guess, to be made of the value of the claim.

Moreover, in many cases the plaintiff’s condition will not have stabilised. We all know that the picture at the date of trial can be very different from that which was given at the date of writ. It is nobody’s fault as a rule, but simply a reflection of the difficulty in forming an accurate medical opinion. There may be an unexpected change for the worse. In this case the interval after service of the writ will help to ensure a proper figure for damages which will be greater than that which the plaintiff would have obtained at the time of the writ. On the other hand, if his condition has improved and his award is less in consequence, this will mean that the defendant has been saved from the possibility of paying more than he should have done. These considerations show that, while it is right to regard the plaintiff as having been kept out of an award, we should not regard it as necessarily resulting in a loss to him of 4 per cent of the judgment sum. I appreciate that against this argument it may be said that the judgment sum is the true figure to work on and that any lower figure, inflation apart, which might have been awarded at an earlier trial, would have been unfair to the plaintiff because, as we now know, the claim was really worth the sum now awarded. However, to award interest on this sum as though it were a debt is to call upon a defendant to pay interest upon a figure that was never demanded and which at the date of the writ is usually sheer guesswork. These considerations lead me to the conclusion that what I call the true earnings rate of interest, namely 4 per cent., if appropriate to a debt, is too high when applied to general damages.

Moreover, the recipient of interest at 4 per cent. will generally pay tax of at least 30 per cent. and therefore, after tax, the net interest is only 2.8 per cent.

As the plaintiff does not pay tax on the interest on general damages and as I regard 4 per cent. gross as too high, we must look for a net figure below 2.8 per cent. There was evidence in this case that to very select bodies, such as pension funds, two recent government stock issues which are index Linked had all been taken up. The actual interest rate which these produced of course fluctuates according to the figure at which *825 the stock stands after issue but the evidence was that around 2 per cent. was enough to attract investors. National savings index-linked certificates also produce only a very low rate of interest.

These considerations lead me to regard the figure of 2 per cent. as appropriate for interest on an award of general damages. I would further say that I respectfully agree with the comments which Watkins L.J. has told me he proposes to add.

WATKINS L.J.

For the reasons provided by Lord Denning M.R. and for those just given by Eveleigh L.J., I agree that (1) the appeal should be allowed so that the rate of interest awarded to the plaintiff on general damages will be 2 per cent., and (2) in future all awards of general damages should bear the like rate of interest.

I would add a reference to section 22 of the Administration of Justice Act 1969 which in amending section 3 of the Law Reform (Miscellaneous Provisions) Act 1934 provides that the court shall exercise its power to award interest on damages or on such part of the damages as the court considers appropriate, unless the court is satisfied that there are special reasons why no interest should be given in respect of those damages.

Clearly these provisions confer a discretion on the court to decide what part of an award of damages shall carry interest, the rate of that interest and the period for which it should be given. That discretion has now to be exercised so as, following the decision in Pickett’s case [1980] A.C. 136 , to award interest on general damages in personal injury cases at, following the guidelines now laid down by this court, the rate of 2 per cent. and, having regard to the circumstances of the case, for the period deemed to be appropriate.

Usually this period will run from the date of the writ to the date of trial, but the court may in its discretion abridge this period when it thinks it is just so to do. Far too often there is unjustifiable delay in bringing an action to trial. It is, in my view, wrong that interest should run during a time which can properly be called unjustifiable delay after the date of the writ. During that time the plaintiff will have been kept out of the sum awarded to him by his own fault. The fact that the defendants have had the use of the sum during that time is no good reason for excusing that fault and allowing interest to run durinsg that time.

LORD DENNING M.R. I would like to add one word after hearing Watkins L.J.’s judgment. It means that there can be an addition to the guideline. The interest, even at 2 per cent., should not necessarily be awarded for the whole period from the date of the service of the writ. The period may be reduced considerably: and only awarded for a lesser time according to the circumstances of the case.[Reported by SUSAN DENNY. Barrister-at-Law]

Representation

• Solicitors: Hexlall Erskine & Co.; Mowll & Mowll, Canterbury.

Appeal allowed. No order as to costs.

KOWLOON MOTOR BUS CO (1933) LTD v YICK KWOK KEUNG & ANOR

– [1991] 2 HKC 632

DISTRICT COURTDEPUTY DISTRICT JUDGE MOHAN BHARWANEYACTION NO 2846 OF 199117 October 1991

• Tort — Road accident — Contributory negligence — Collision between two vehicles on highway — Duty of driver in front to give warning before stopping — Nature of warning which ought to be given
• Tort — Damages — Repair and loss of use of bus — Method of assessing loss of use — Delay in effecting repairs — Effect of failure to mitigate loss on multiplier — Standing charge cost method of assessment

The plaintiff’s bus driven by its employee was travelling in the slow lane of Tuen Mun highway heading towards Yuen Long slightly after noon on 18 April 1989. Another bus in front of the plaintiff’s bus stopped in response to the direction of a police officer. The plaintiff’s employee stopped accordingly and gradually. A lorry of the second defendant driven by the first defendant, which was following the plaintiff’s bus, failed to stop in time and collided with the rear of the plaintiff’s bus.The defendants alleged contributory negligence as there was no warning given by the plaintiff’s employee. The plaintiff claimed damages for repair and loss of use of the vehicle on the basis of a ‘standing daily cost charge’.

Held, granting the plaintiff’s claim:

1. The first defendant had failed to keep a proper lookout and failed to keep a safe distance from the plaintiff’s vehicle in front of him to enable him to stop in time to prevent a collision.
2. The plaintiff’s driver was not contributorily negligent. A driver who is decelerating and bringing his vehicle to a gradual stop is under no duty to give any warning over and above that provided by his illuminated brake lights. In any case, on a balance of probabilities, the first defendant would not have seen or reacted in time to any further warning.
3. The plaintiff had an obligation to mitigate loss. To allow the damaged bus to be idle for 40 days was too long although the period of 26 days taken for the repair work was not excessive. A total multiplier of only 56 days was allowed.
4. The claim for depreciation was based on the average life of an operational bus. The plaintiff permitted 13% of its fleet to be on standby at any one time. The claim must be discounted to reflect the longer life of a standby bus. An adjustment of the claim for depreciation based on a 15-year lifespan would be fair in the circumstances. Once this adjustment was made, the standing charge cost method of assessment provided, on the evidence available, a fairer and reasonably stable measure of calculating damages for loss of use, as compared to the interest on capital and depreciation measure. Birmingham Corp v Sowsbery [1970] RTR 84 ; (1969) 113 SJ 877 applied. Kowloon Motor Bus Co (1933) v A-G default (A791/84, unreported) distinguished.[1991] 2 HKC 632 at 633

Cases referred to

Birmingham Corp v Sowsbery [1970] RTR 84 ; [1969] 113 SJ 877

Kowloon Motor Bus Co (1933) v A-G (A791/84, unreported) default

Kowloon Motor Bus Co (1933) v Ho Kwok Man (VCJ 6219/86, unreported) default

Other legislation referred to

Road Users Code p 41

Action

This was a claim by the plaintiff for damages suffered as a result of a traffic accident. The defendants alleged contributory negligence on the part of the plaintiff. The facts appear sufficiently in the following judgment.DEPUTY DISTRICT JUDGE MOHAN BHARWANEY

The plaintiff brings this action against the defendants to recover damages suffered as a result of a traffic accident, which occurred shortly after noon on 18 April 1989, on the Yuen Long bound carriageway of Tuen Mun Road, near Tsing Lung Tau. There is no dispute that the plaintiff’s omnibus (the bus), registration no DG 316, sustained damage on that occasion when the front of a goods vehicle (the goods vehicle), registration no DU 7492 , owned by the second defendant and driven by his servant or agent, the first defendant, collided with the nearside rear of the bus. The issues on liability are whether the collision was caused or contributed to by the negligence of the first defendant and, if so, whether there was any contributory negligence on the part of the plaintiff’s servant who drove the bus at the material time. I proceed to resolve the question of liability before dealing with quantum.Liability

The scene

The accident occurred on the inside or slow lane of a three lane carriageway. At the material time, the road surface was dry and the weather was fine. Visibility was good. No sketch plan of the locus in quo had been prepared nor were any photographs of the scene produced. The driver of the bus, Shum Cheong Shun, who gave evidence, drew a rough sketch of the scene of the accident, which he produced (P-3). This showed that there was a left hand bend in the carriageway before it straightened out. Mr Shum did not describe this bend as being either gentle or sharp. The sketch depicts the bend as being slightly more marked than a gentle bend. The first defendant, Ying Kwok Keung, who also gave evidence, acknowledged the presence of the left hand bend in the road but did not describe how marked or sharp it was. Mr Shum did say that there were trees to the left of the bend which apparently did not obscure his view of the part of the carriageway after the bend. Having regard to this evidence, I find, in the absence of a proper sketch or photographs, that the curvature of the road was similar to that[1991] 2 HKC 632 at 634depicted in the rough sketch drawn by Mr Shum. I also accept the evidence of Mr Ying and find that the carriageway was level at the bend in the road but started to run slightly downslope thereafter.

The plaintiff’s version

Mr Shum gave evidence that, at the material time, he had been driving his bus on the inside lane following another bus, a Victory model bus also belonging to the plaintiff company (the Victory bus), at a speed of about 55 to 60 km/h. The distance between the two buses was about 40 feet, about the length of a bus. When he was negotiating the bend in question, he noticed a traffic policeman come out from the shoulder of the road on the left hand side of the inside (or slow) lane and signal the Victory bus to stop. The bus in front did so and Mr Shum stopped his bus as well. He did not stop his bus abruptly. He stopped his bus ‘naturally’ and so did the Victory bus in front of him. Eight to ten seconds after he had stopped his bus and engaged his handbrake, he heard a bang from the rear of his bus and felt his bus shake. He looked in his rear view mirror and saw the defendants’ goods vehicle. After ascertaining that no one had been hurt, he alighted from his bus and saw the driver of the goods vehicle clearing away glass fragments of his broken windscreen. He also saw a small white police car in front of the Victory bus and a private car in front of the police car. The police car was flashing a blue light which he had not seen before he had stopped his bus. He did not know why the policeman stopped the Victory model bus nor the reason why the private car was stationary at that part of the road. All the vehicles had come to a stop in the straight section of the road, as depicted on his rough sketch. After ascertaining that nobody in the bus and in the goods vehicle had been injured, the policeman told him and the driver of the goods vehicle that it was dangerous for the vehicles to remain stationary at that location and suggested that they drive the vehicles to another safer place if they wished to further discuss or settle the matter.Under cross-examination, Mr Shum said that he had seen the policeman signal the Victory bus to stop before his own bus, DG 316, had negotiated the left hand bend. He, therefore, prepared to slow down and to stop his bus. He did so by not accelerating when he negotiated the bend and by braking when his bus was at the end of the bend. When his bus had come to a complete stop, it was eight feet behind the stationary Victory bus. He had looked at his three rear view mirrors all along the journey on Tuen Mun highway and did so when he braked to stop his bus but he did not see the defendants’ goods vehicle. He did not see any vehicle before he negotiated the bend and could not see any when he was inside the bend. He did not pay attention to the vehicles in the other two lanes. He agreed with the suggestion that the collision occurred within a few seconds, a very short period of time, after he had completely stopped his bus.[1991] 2 HKC 632 at 635

The defendants’ version

Mr Ying gave evidence that he had been driving the goods vehicle along the middle lane of the Yuen Long bound carriageway of Tuen Mun Road. As he was negotiating a left hand bend, he saw vehicles behind him so he indicated and cut into the slow lane. He drove at a speed of about 55 to 60 km/h in fourth gear. His braking system was normal. Before he cut into the slow lane, he did look but did not see any vehicle in front on the slow lane. However, he saw the plaintiff’s bus in front of his vehicle after he had cut into the slow lane. The distance between them was about 40 feet. Suddenly the bus stopped abruptly. He immediately applied his foot brakes but was unable to avoid a collision. The bus driver did not give any indication before he stopped the bus but he saw that its brake lights were lit. After the collision, he alighted from his vehicle and only saw two vehicles stopped at the scene, his vehicle and the other bus, and he saw one police officer there. He explained that he had changed lanes in order to give way to vehicles behind him and he clarified that his vehicle had completely entered the slow lane before he started to negotiate the left hand bend.Under cross-examination, Mr Ying said that he was sure that he saw a bus in front to his left and passing traffic on his right before he cut into the slow lane. The distance between his vehicle and the bus in front was at least 40 feet or more before he changed lanes. The distance between them was reduced to 35 to 40 feet as he changed lanes, probably because the bus reduced speed in order to negotiate the bend. He reduced the speed of his vehicle as well, in order to negotiate the bend and, then, after he had entered the bend, he accelerated a little and maintained that speed. Before the collision, he did not lose sight of the bus at any time. Their respective speeds were about the same. He disagreed with the suggestion that his vehicle had been too close to the bus in front and pointed to the far end of the court room (some 60 feet away) as representing the distance between them. He could not avoid a collision because the bus stopped abruptly. On seeing its braking lights and seeing that it suddenly reduced speed and the distance between them getting shorter, he applied his footbrakes immediately but could not avoid a collision, in fact it happened so suddenly. He said that it was possible that there were more vehicles stationary at the scene after the collision than he had mentioned during his evidence in chief, indeed, he saw a motorcycle there.

Findings

I was impressed by both witnesses and I found them both to be truthful. In so far as there were differences between their testimony, such as the presence of a motorcycle at the scene, I find the recollection of Mr Shum to be more reliable. In so finding, I do not conclude that Mr Ying deliberately told me lies but that his recollection of the number of stationary vehicles and the presence of the motorcycle was less reliable and probably mistaken.[1991] 2 HKC 632 at 636He was, of course, further back from those stationary vehicles. In addition, Mr Ying’s confirmation regarding the presence of the police officer at the scene supports Mr Shum’s testimony in that regard.I find that Mr Shum drove his bus in the manner and at the speed he described in the witness box and, that he saw a police officer walk out from the shoulder of the road to the inner lane, in the straight section of the carriageway after the left hand bend, and signalled the Victory bus to stop. Mr Shum had noticed the policeman before his bus started to negotiate the left hand bend in the road. The fact that the officer was willing to place himself in a position of some hazard, posed by the oncoming Victory bus, leads me to infer that he was some distance away from the Victory bus. I find that the Victory bus stopped gradually and that Mr Shum’s bus did so as well. Although he stopped some eight feet behind the Victory bus, I find merit in the submissions advanced by Mr Wong on behalf of the plaintiff that Mr Shum could have stopped his bus further back if he had wished to do so. I accept his evidence that he slowed down and stopped, firstly, by not pressing the accelerator when he negotiated the bend and, then, by braking when the bus approached the end of the bend until it came to a halt. Above all, I find that there was no emergency braking on the part of the bus, indeed, there is no suggestion on the evidence, and definitely not on the part of Mr Ying, that he heard the sound of screeching brakes or any other loud sound likely to be emitted by a double decker bus under emergency braking.The collision with the goods vehicle occurred in the straight section of the road after the left hand bend, some seconds after the bus had come to a halt and after Mr Shum had engaged the hand brake. It is clear to me that Mr Shum’s statement and demonstration of the time lapse was at best an approximation, albeit, an honest one and I am unable to be more precise in my finding regarding this time lapse.I also find that Mr Ying drove his goods vehicle in the manner and at the speed he described in his evidence. There is no suggestion of excessive speed in this case nor do I find any excessive speed on the part of either driver. I find that Mr Ying saw the bus in front of him in the slow lane before he changed lanes. His initial position in the middle lane and the presence of the bus in the slow lane in front of him would have obscured and, in my finding, did obscure his view of the police officer in front.I find further that the distance between the bus and goods vehicle closed because the bus decelerated as it negotiated the bend. Mr Shum said he did so and Mr Ying believed that to have been the case. Although the distance between the vehicles closed, I do not find that Mr Ying failed to keep a safe distance from the vehicle in front of him when he first changed lanes to follow the bus.Both witnesses gave similar estimates of the distance between his vehicle and the one in front, namely, about 40 feet. In Mr Ying’s case, this[1991] 2 HKC 632 at 637distance was further reduced by a few feet for the above reason. A review of the table of stopping distances set out on p 41 of the Road Users Code (the Code) suggests, at first blush, that a distance of 35 to 40 feet is unsafe for a speed of 55 to 60 km/h — that table gives a stopping distance of 35 metres (or about 110 feet) for a speed of 60 km/h. However, the table, although providing a useful measure for assessing a vehicle’s ability to stop in time to avoid colliding with a stationary obstruction, does not assist much when one considers what is a safe distance between moving vehicles — the vehicle in front does not stop instantaneously and the time it takes to stop will provide a cushion enabling the following vehicle to stop as well, providing, of course, that the driver of the latter keeps some distance to enable him to react and stop in time. Given present traffic conditions, modern efficient braking systems and the demands for an efficient use of our congested roads, I cannot conclude that a driver is necessarily negligent if he fails to maintain the overall stopping distance set out in the table at p 41 of the Code. The gap should never be less than the thinking distance of the following driver because, then, he would be unable to avoid a collision with the vehicle in front if it stops suddenly. How much longer the gap should be must be relative to the quality of the view ahead and of the lookout kept by the following driver; a driver who is alert and poised to react can get closer to the car in front than one whose attention is diverted, for example, by the majestic scenery or a conversation with his passenger. Even so, a gap of about 40 feet (or 12.5 m) at a speed of 60 km/h is, prima facie, insufficient and, therefore, evidence of negligence as it is less than the thinking distance of 15 metres provided by the table at p 41. There was no suggestion that Mr Ying’s thinking distance was less than this because his reactions were faster than the average driver’s reactions.However, I bear in mind the fact that it is notoriously difficult for witnesses, giving evidence in court many months and even years later, to accurately estimate distances and I find that Mr Ying had initially maintained a safe distance from the bus in front. I am supported in this finding by Mr Ying’s demonstration, in court, of the distance between the two vehicles which suggests a distance of about 60 feet (or about 19 m). Whatever may have been the actual distance, I find that Mr Ying maintained and continued to maintain a safe distance from the bus in front when he changed lanes to follow it, albeit, that the distance between them closed somewhat for the reason that the bus decelerated as it negotiated the bend.Unfortunately, the distance between the vehicles closed even further for the reason that Mr Ying, on his own admission and which I accept, accelerated a little after his vehicle entered the bend. This had the effect of closing the distance even further because there was no corresponding acceleration on the part of the bus.[1991] 2 HKC 632 at 638I find that Mr Shum had then or soon thereafter commenced braking. The unfortunate coincidence of these events and of the matters set out below was the belief, honestly and genuinely held by Mr Ying, that the bus stopped so abruptly that he was unable to avoid a collision despite emergency braking on his part when he first realized what was occurring. I have already found that Mr Shum did not stop his bus abruptly or suddenly. It follows that Mr Ying’s belief was mistaken. That mistaken belief, I find, arose from a failure on his part to appreciate that not only was the bus not accelerating out of the bend but that it had, in fact, commenced braking.That failure, in turn, arose from a failure on his part to keep a proper lookout and resulted in Mr Ying accelerating and further closing the gap between the vehicles to such a distance that he could not react in time to avoid a collision. Even if I were wrong regarding this latter conclusion, namely, that he failed to keep a safe distance from the bus in front, he certainly failed to keep a proper lookout, for the speed at which he was travelling and given the distance that he was in fact maintaining from the bus in front of him, either one failing or the other or a combination of both led to the subsequent failure to avoid a collision. In so driving the goods vehicle, Mr Ying departed from the standard of a reasonably prudent driver. I find that if he had kept a proper lookout initially or if he had increased his alertness when he further closed the distance between him and the bus, he would have been able to avoid the collision. His negligence caused or materially contributed to the collision and I find Mr Ying liable and the second defendant vicariously liable to the plaintiff in damages.

Contributory negligence

Was Mr Shum in any way negligent and, if so, did any negligence on his part cause or materially contribute to the collision? I have already found that he stopped his bus gradually. In those circumstances, was he under a duty to warn vehicles following him of his intention to slow down and stop, over and above the obvious indication from his illuminated brake lights? Mr Shum said that he first saw the goods vehicle after the collision. I accept that evidence. However, I do not accept his further evidence that he looked at his three rear view mirrors when he commenced to brake. He may have looked at his rear view mirrors now and then along the journey on Tuen Mun Road but I find that he did not do so when he commenced braking as otherwise he could not have failed to notice the presence of the goods vehicle behind him. I have already found that Mr Ying was not driving at an excessive speed. It follows that this is not a case of a speeding vehicle suddenly and unexpectedly arriving at the scene. Whether he looked or not is however, not relevant to this issue because even if he did not look, he could not have failed, as a reasonable driver, to anticipate the presence of vehicles behind him on that busy highway. The question, therefore, is whether or not he should have done more than just brake and rely on his brake lights to warn vehicles likely to be following him. It was[1991] 2 HKC 632 at 639suggested that he should have switched on his hazard warning lights or his left indicator light. I reject that suggestion as being unreasonable and as placing an unreasonable burden on the Hong Kong motorist. Even if there was evidence to show that the bus was equipped with hazard warning lights, and there was none, I find that a driver who is decelerating and bringing his vehicle to a gradual stop, even on a busy highway such as Tuen Mun Road, is under no duty to give any warning over and above that provided by his illuminated brake lights.Even if I have erred on this point, I find that a failure on the part of Mr Shum to warn those behind him, by the use of hand signals or by switching on his left indicator light, did not cause or materially contribute to the collision because as I have already found, Mr Ying was not keeping a proper lookout and, on a balance of probabilities, would not have seen or reacted in time to such warning.There may well be a duty on the driver of a leading vehicle on a high speed highway such as Tuen Mun Road to give special warning, by a blast of his horn for example, over and above that provided by his illuminated brake lights if he intended to make a sudden emergency stop. But that was not the case here.A similar duty may also arise on the part of the leading driver, even if he intended to stop gradually, if he looked in his rear mirror when he commenced to brake (as a reasonably prudent driver would do) and saw that the following vehicle was very close behind him. That also was not the case here because if Mr Shum had looked in his rear view mirrors (or some of them) when he commenced braking, he would have seen the goods vehicle some distance behind him and certainly not close enough to his bus as to alert him to the need to give special warning. I find support for this finding in the evidence of Mr Shum, which I accept, that the collision occurred some seconds after he had already brought the bus to a halt and had engaged its handbrake. Even if I were wrong to make such positive findings, the onus of this issue is on the defendants and they have failed to satisfy me, on a balance of probabilities, that he would have been alerted to the need to give special warning had he looked in his rear view mirrors when he commenced braking.In the event, I find that there was no contributory negligence on the part of Mr Shum that caused or materially contributed to the collision.Quantum

The plaintiff claims damages for the cost of repairs to the bus ($29,802.02), a survey fee of $320 paid to Roger Houghton Motor Surveys Ltd and damages for loss of use of the bus ($37,180). The total amount claimed is $67,302. There is no counterclaim in respect of damage to the goods vehicle.[1991] 2 HKC 632 at 640

Cost of repairs and survey fee

I am satisfied on the evidence and in the absence of evidence from the defendants that the sum of $29,802.02 was reasonably incurred in repairing the damage caused by the collision and that it was reasonable to obtain the services of motor surveyor and to pay the fee claimed. I reject the rather astonishing suggestion made by Mr Kong, on behalf of the defendants, that Mr Raymond Lee, of the motor survey company, although qualified to assist me on the reasonableness of the amount of repair costs claimed by the plaintiff, was not an expert on the question of whether such work was reasonably necessary to repair the damage caused by the collision. Mr Lee is a Member of the Institute of Damage Surveyors (MIDS) and an Associate Member of the Institute of Motor Industry (AMIMI). He has 13 years experience in motor survey work. He surveyed the bus in question before confirming the correctness of the plaintiff’s vehicle repair report and adjusting the amount claimed to $29,802.02, which I award to the plaintiff under this head of claim together with $320 in respect of the survey fee.

Damages for loss of use

There is no doubt that a company such as the plaintiff, which offers franchised bus services and maintains a standby facility to ensure that there is no disruption to such services, is just as entitled to claim damages for loss of use as a claimant who hires a replacement vehicle during the period when repair works are carried out to his damaged vehicle and claims the amount of hire charges as damages for loss of use. The controversy in this case centered on, firstly, the multiplier to be used in assessing such a claim and secondly, the multiplicand.

Multiplier

The plaintiff claims damages for loss of use over a period of 65 days. The collision occurred on 18 April 1989. Mr Lee surveyed the bus and sent his report by 26 April 1989, which I find to be a reasonable period of time within which to do so. Mr Tsang, an assessor in the repair department of the plaintiff, received authorization to commence repairs on 27 April 1989. The actual repairs commenced a month later, took 26 days and were completed on 21 June 1989. I am satisfied on the evidence of Mr Lee and Mr Tsang and, indeed, the same was conceded by Mr Kong for the defendants that 26 days was a reasonable period of time within which to complete repairs.There is no doubt that there is, in law, a duty on the plaintiff to mitigate its loss by repairing the damaged bus as soon as reasonably possible. There is a ‘duty’ in the sense that the defendants are not liable for such loss of use which the plaintiff could reasonably have avoided by commencing repairs on the bus in question earlier than it in fact did. The question of fact I have to decide on the[1991] 2 HKC 632 at 641whether the plaintiff acted reasonably in commencing repairs one month after receiving Mr Lee’s report or rather since the onus of the issue is on the defendants, whether the defendants have proved that the plaintiff had acted unreasonably.In seeking to discharge this onus, they rely on the fact that the bus sat idly for a month and on the absence of any cogent evidence or explanation from the plaintiff why this was so. Mr Tsang’s explanation for the delay was that there was a shortage of manpower. I understood his evidence to be that there were sufficient workers to carry out the daily assigned work but not enough to cope with extra work. Why this was so was left unexplained. I was impressed by the submission of Mr Wong, on behalf of the plaintiff, that the plaintiff sought to strike a balance between hiring too many workers and leaving them idle and increasing overheads on the one hand and being understaffed on the other hand. However, no evidence was adduced on this matter and there was no evidence that the plaintiff had sought to strike such a balance.On the evidence, the repair work took 26 days but only commenced on 27 May 1989, some 40 days after the collision. I am satisfied, on the evidence and in the absence of explanation from the plaintiff, that any period in excess of 26 days within which to commence repairs, even taking into account the period of time required to have the bus surveyed, was excessive and that the plaintiff had acted unreasonably when it failed to commence repairs within 26 days from the date of the collision. I, therefore, only allow a multiplier of 52 days for the claim in respect of loss of use. In truth, there is very little evidence available to me to arrive at this conclusion but I think the defendants can justifiably point to the fact that the repairs only took 26 days and assert that it was unreasonable, in the absence of any or any proper explanation, for the plaintiff to wait longer than that to commence repairs on the bus.

Multiplicand

Miss Doris Lau Kwun Kan, the financial planning and costing manageress of the plaintiff, gave evidence and proved to my satisfaction that the daily standing charge cost to the plaintiff of the replacement bus was as follows:

(a) Interest on capital value. This was ascertained by applying the best lending rate prevailing during the replacement period (divided by 365

days) to the capital value, which was the written down value after depreciation, of the replacement bus. This exercise produced a daily interest charge of $152.

(b) Depreciation. This was calculated on a daily basis by taking the original purchase price of the replacement bus and depreciating the same on a straight line basis over ten years. This exercise (cost divided by ten years divided by 365 days) produced a daily figure of $189.

(c) Licence fee. The daily cost of the annual licence fee of the replacement[1991] 2 HKC 632 at 642

bus was obtained by dividing the annual licence fee by 365 days to produce $13.

(d) Insurance.A similar exercise on the annual cost of fire and third party insurance on the replacement bus produced a daily cost of $59.

(e) Overhaul. Instead of claiming the average cost of maintaining the fleet which would have included maintenance costs for ordinary wear and tear, a running expense and not a standing charge cost, the plaintiff restricted its claim to the average cost of the annual overhaul of the whole fleet made compulsory by the relevant regulations. An annual overhaul is required for each vehicle before it can obtain a certificate of roadworthiness. In addition, a major overhaul is required every four to five years in order to obtain a certificate of fitness for buses of a certain age. About one-fifth of the fleet undergoes this major overhaul every year. About 87% of the whole fleet was on the road on average, 13% being either on standby or undergoing maintenance. The daily cost was calculated by taking the actual expenditure of the compulsory overhaul of the whole fleet incurred in the year of the collision (omitting therefrom any element of daily maintenance) and dividing that amount by the total number of licensed buses and by 365 days to produce a daily cost of $311.

The total daily cost of the standby facility amounted to $724.The plaintiff only claims a daily cost of $572, omitting from its claim the sum of $152 being the daily interest on the depreciated capital value of the replacement bus, although Lane J, as he then was, had allowed damages for loss of use of a bus in Birmingham Corp v Sowsbery [1970] RTR 84 based on the daily standing cost charge, a figure which included ‘no running charges but does include a sum for expenses on capital’ (at p 85).Nevertheless, the claim of $572 a day, based on the standing daily cost charge, yields a higher award than the more conventional measure for such claims, namely, interest on capital and depreciation. The latter method, taking the above figures, produces a daily multiplicand of $341 and is considerably less than the plaintiff’s claim. It, therefore, falls to me to consider which measure I should select to assess this head of claim.Lane J in the Sowsbery case preferred the measure based on the standing cost charge since ‘the standing cost basis of calculation does not suffer, as the other method does, from possible fluctuations in capital value and interest rates’ (at p 87). According to Lane J, the latter method did not provide fair compensation at times of low interest rates and was better suited to a long-living chattel like a ship than a bus which depreciated rapidly.Hunter J, as he then was, in Kowloon Motor Bus Co (1933) Ltd v A-G (A791/84, 16 July 1984, unreported), preferred to award damages based on interest on capital and depreciation, as I understand his judgment, largely because there was no clear[1991] 2 HKC 632 at 643cost charges were in that case; the figures proffered for depreciation and maintenance being averages over the whole fleet of which a very small percentage was at any one time off the road on standby (at p 9). Those figures had to be reduced to reflect the lesser need for maintenance and lesser depreciation of a standby facility. In the absence of better evidence, Hunter J thought his proper course was ‘to stick to what I know, stick to an interest and depreciation calculation’. He found justification for doing so from the fact that the rise in interest rates had almost certainly closed the gap which existed between these two methods of computation.The observations of Hunter J do not apply with equal force here. The claim made in the present case in respect of overhaul costs eliminates running maintenance costs and there is no suggestion that the plaintiff was inefficient in permitting 13% of its fleet to be on standby or undergoing maintenance at any one time. However, the claim for depreciation was based, as I understood the evidence, on the average life of an operational bus. This must be discounted to reflect the longer life of a standby bus. An adjustment of the claim for depreciation based on a 15 year lifespan would be fair in the circumstances. Once this adjustment is made, and I am prepared to do so, the standing charge cost method of assessment provides, on the evidence available to me, a fairer and reasonably stable measure of calculating damages for loss of use, and is the one I adopt in the present case.The same measure was adopted by Scriven DJ in Kowloon Motor Bus Co (1933) Ltd v Ho Kwok Man & Anor (VCJ 6219/86, 4 April 1987, unreported). His reason for so doing was that the claim in the case before him related to a damaged bus whereas the claim before Hunter J was a total loss claim. With respect, that distinction, in my view, is not a valid basis for choosing one measure over another. The claim for loss of use was similar in both cases; in one, the standby bus was used until the damage was repaired, in the other, the standby bus was used until a replacement bus became available. In these circumstances, the measure of the cost of the standby facility ought to be the same in both cases.The adjustment to the claim for daily depreciation reduces the multiplicand to$509 (a 15 year lifespan produces a daily depreciation of $126 [$189 x 365 days x 10 years ÷ 15 years ÷ 365 days] which is $63 less than the amount claimed). I award damages for loss of use in the total sum of $26,468 ($509 x 52 days).

Total award

There will be judgment for the plaintiff for the sum of $56,590.02 and interest thereon at the rate of 10% pa from 21 June 1989, the day the bus was repaired to today.

Raymond Leung

CHU CHIN YIAU v RAY ON CONSTRUCTION CO LTD

– [1992] 1 HKC 246

DISTRICT COURTDEPUTY DISTRICT JUDGE BHARWANEY

EMPLOYEES COMPENSATION CASE NO 31 OF 1991

21 January 1992

Employment — Employees’ compensation — Assessment of loss of earning capacity — Whether the assessment of the Board correct at the relevant time — Whether certificate issued in ignorance of or under a mistake as to the true nature of the extent of injury — Employees’ Compensation Ordinance (Cap 282) ss 9 & 16B

On 9 September 1989, the applicant, an odd job labourer, suffered an injury to his back which arose out of and in the course of his employment with the respondent. The Ordinary Assessment Board assessed him as suffering from a loss of earning capacity of 21/2%. He sought to cancel a minor injuries certificate and to apply for compensation for permanent partial incapacity. The issues for the court to determine were whether the assessment of 21/2% loss of earning capacity was correct at the relevant time and whether the certificate was issued in ignorance of or under a mistake as to, the true nature of the extent of the injury.

Held, dismissing the application:

1. A court dealing with an appeal under s 18(1) or an application for compensation under s 9 of the Employees’ Compensation Ordinance (Cap 282) has to start afresh, relying not only on the certificate of the Board but also on any other evidence, especially medical evidence, adduced before it, to assess the loss of earning capacity permanently caused by the injury suffered in an accident at work. Chan Kit v Sum Wo Industrial Manufactory 1989 2 HKLR 230 and Yip Fong Ming v Joint-Effort Engineering Co [1989] 1 HKC 505 applied.
2. The correctness of the assessment by the Ordinary Assessment Board had to be judged with regard to the applicant’s condition, as it was, at the time of the issue of the minor injuries compensation certificate, disregarding events subsequent thereto which might make the extent of injury or the extent of injury or the extent of loss of earning capacity greater than it was thought to be at the time of the issue of the certificate. Tung Shui Bun v Gammon Building Construction [1985] 2 HKC 177followed.
3. As the applicant was able to return to full time work before August 1990 and in the absence of any evidence or material to contradict the Board or to suggest that it was wrong for the Commissioner to assess compensation on 24 July 1990 based on an assessment of loss of earning capacity of 21/2%, the applicant had failed to show that the amount assessed for loss of earning capacity was not in accordance with the Ordinance and, in particular, s 9(1)(c) thereof.
4. Injury suffered in the course of a process of work is not necessarily suffered as a result of an ‘accident’, either within the ordinary meaning of the word or its meaning under the Ordinance.
5. Section 9(1) directs the Board, as well as the court, to assess the permanent partial incapacity which resulted from the injury complained of, not from a pre-existing condition or from a future re-injury. The Board did not have the benefit[1992] 1 HKC 246 at 247of hindsight and should not be affixed with knowledge of subsequent events. The assessment of loss of earning capacity must be made as t 24 July 1990 with the knowledge that the applicant had recovered from the injury and was able to return full time to his former employment. It was an assessment of the potential for suffering from future loss of earning capacity.
6. )On the balance of probabilities, the applicant had not shown that an assessment of 21/2% loss of earning capacity as at 24 July 1990 was not in accordance with the Ordinance. Accordingly the application to cancel the minor injuries compensation certificate was refused.

Per curiam:

It was surprising that members of the Board who conducted the review and issued the certificate of review of assessment were not called to give evidence. The fact that the certificate of the Board was admissible as evidence of its contents by virtue of s 16H, is no reason not to call its members, particularly, when one wants to overturn the certificate and not rely on it. The failure to call members of the Board on the issue of whether the Board was ignorant or mistaken about the true nature of the injury was even more surprising since they could have given direct evidence on what they took or did not take into account, when they assessed the applicant’s loss of earning capacity and whether or not they appreciated the applicant’s pre-existing condition and vulnerability to future injury.

Cases referred to

Chan Kam v Standard Chartered Bank Hong Kong Trustee [1988] HKC 345

Chan Kit v Sum Wo Industrial Manufactory [1989] 2 HKLR 230

Lee Chung Tai v KMB Co [1988] HKC 334

Tung Shui Bun v Gammon Building Construction [1985] 2 HKC 177

Yip Fong Ming v Joint-Effort Engineering Co [1989] 1 HKC 505

Legislation referred to

(HK) Employees’ Compensation Ordinance (Cap 282) ss 5, 9, 16A, 16B, 16D–16GA, 16G(3), 17, 17B, 18, 18A

Other legislation referred to

McGregor Damages (15th Ed) para 1429

Application

This was an application by the applicant pursuant to ss 9 and 16B of the Employees’ Compensation Ordinance (Cap 282). The facts appear sufficiently in the following judgment.DEPUTY DISTRICT JUDGE BHARWANEY

The applicant who was then 47 years old, suffered an injury to his back on 9 September 1989, which arose out of and in the course of his employment with the respondent as an odd job labourer at the site of a newly constructed church in Sham Shui Po. The applicant was cleaning the window panes on the third floor of the building[1992] 1 HKC 246 at 248with a running hose when he suddenly sprained his back. He brought two applications as a result of this accident at work. Firstly, an application pursuant to s 16B of the Employees’ Compensation Ordinance (Cap 282) (the Ordinance) to cancel a minor injuries certificate of compensation assessment issued by the Commissioner for Labour on 24 July 1990, and secondly, an application pursuant to s 9 of the Ordinance for compensation for permanent partial incapacity.

I directed, at the outset, that both applications be heard together. The minor injuries certificate had been issued, and assessed compensation for permanent partial incapacity based on a certificate of review of assessment issued by the Employee’s Compensation (Ordinary Assessment) Board on 7 June 1990 pursuant to s 16G(3) of the Ordinance. The Ordinary Assessment Board had on that day assessed the applicant as suffering from a loss of earning capacity of 2½%.

This assessment has not been appealed from and I refused Mr Emerson’s application, made on behalf of the applicant in the course of his opening, for leave to appeal from the assessment of the Board, for the reason that it was not necessary for the applicant to appeal therefrom in order to proceed with his application for compensation pursuant to s 9 of the Ordinance. This is clear from s 18A of the Ordinance which enables the court to determine all claims for compensation under the Ordinance, except to the extent determined by certificate under s 16A or by agreement under s 17. A certificate of the Board, issued pursuant to the provisions of ss 16D–16GA, does not of course, determine the compensation payable under the Ordinance although it may assess the degree of loss of earning capacity. Further, although s 18(3) enables the court to determine the amount of compensation payable when it entertains an appeal from an assessment made by an Ordinary or a Special Assessment Board, neither this provision nor the provisions in ss 16D–16GA, limit the court’s power to do so only upon such an appeal being lodged. The court therefore, is able, by virtue of s 18A, to determine an application for compensation under s 9 of the Ordinance Ordinance independently of and despite a previous assessment made by an assessment Board, and notwithstanding that there has been no appeal therefrom. In fact, whether an appeal is lodged pursuant to s 18(1) or application made for compensation under s 9 or, indeed, both procedures resorted to at the same time, it is clear that a court approaching the matter has to start afresh, relying not only on the certificate of the Board but also on any other evidence, especially medical evidence, adduced before it to assess the loss of earning capacity permanently caused by the injury suffered in an accident at work (Chan Kit v Sum Wo Industrial Manufactory [l989] 2 HKLR 230 at 233 and Yip Fong Ming v Joint-Effort Engineering Co & Anor [1989] 1 HKC 505 ).

Section 18A however, expressly excludes the court’s power to determine claims for compensation ‘to the extent that such claims are determined …[1992] 1 HKC 246 at 249by certificate under s 16A’. The applicant here therefore, could not proceed further and it was common ground that this was so unless he succeeded in overturning the minor injuries compensation certificate issued under s 16A. He sought to do so by his application, brought pursuant to s 16B, to cancel the certificate.The court may accede to an application to cancel, if it is proved that:

(a) the sum paid or to be paid was or is not in accordance with the provisions of this Ordinance; or

(b) the certificate was issued in ignorance of or under a mistake, as to the true nature or the extent of the injury; or

(c) the certificate was based upon any false or misleading information or statement given or made (s 16B(l)).

The onus is clearly upon the applicant, in applications brought under s 16B(l), to establish either one or more of these three grounds, before the court will entertain his application to cancel the certificate.

Instead of resorting to s 16B, an appeal may also be brought pursuant to s 18(1) from the decision or assessment of the Commissioner of Labour under s 16A and which has resulted in the minor injuries certificate complained of. Section 18(3) enables the court entertaining such appeals to confirm or reverse any such decision or assessment or to substitute its own assessment and determine the amount of compensation payable, without the limitations imposed by s 16B(l). These limitations are mirrored in s 17B which covers applications to cancel agreements approved by the Commissioner of Labour under s 17. The appeal provisions in s 18(1) have not been extended however, to cover s 17 agreements, presumably because it was thought that the right of an applicant to withdraw from an agreement, which on the face of it, he has voluntarily entered into, should be curtailed. This rationale does not apply to a minor injuries certificate issued by the Commissioner and probably explains why a wider right to appeal therefrom is granted by s 18(1).

For reasons that are not known to me, the applicant did not rely upon s 18(1) to lodge an appeal from the decision or assessment of the Commissioner giving rise to the certificate complained of. As stated above, it was common ground that the court could not determine his application for compensation unless he succeeded in his application to cancel the certificate.

Application to cancel the minor injuries compensation certificate

Mr Emerson relied on the first two grounds in s 16B(l), in support of the application to cancel the certificate and to withdraw his application to be allowed to rely upon the third ground as well, in the face of strong opposition from Mr Warren Chan who appeared for the respondent.[1992] 1 HKC 246 at 250

Two bundles were placed before me; a trial bundle and a respondent’s bundle. With the exceptions of the reports of Dr Daniel Wu and Dr Yeung Po Sum, all the documents comprised in them were agreed, in that their formal production was dispensed with. However, they were not agreed to be admissible as evidence of their contents. In addition, Dr Ho Yiu Kei was called to give evidence, as did Dr Wu and Dr Yeung and the applicant.

The applicant gave evidence, which I accept, that he had always worked on construction sites and that he had been employed by the respondent for about three months up to the time of the accident complained of. After the accident, he was admitted to United Christian Hospital, discharged the next day and either then or some stage thereafter, seen and treated by Dr Ho.

He was granted sick leave certificates from 9 to 30 September 1989 and from 2 October 1989 to 8 January 1990. He returned to work in March 1990 and was assessed by an Ordinary Assessment Board on 13 March 1990. The Board issued a certificate of assessment dated 23 March 1990 certifying that he suffered from a 2% loss of earning capacity as a result of the back injury sustained on 9 September 1989. The applicant applied for a review of the assessment. This took place on 22 May 1990 and resulted in the certificate of review of assessment, assessing loss of earning capacity at 21/2%, being issued on 7 June 1990. This, in turn, led to the issue on 24 July 1990 of the minor injuries compensation certificate now complained of.

This certificate assessed compensation by way of periodic payments (under s 10) and permanent incapacity (under s 9) in the total sum of $34,810. There is no dispute as to the calculations giving rise to this amount. Mr Emerson however, contends that this amount was not in accordance with the Ordinance because the assessment of 21/2% loss of earning capacity was too low. It is clear from the decision of the Court of Appeal in Tung Shui Bun v Gammon Building Construction Ltd 1985 2 HKC 177 that the correctness of the assessment has to be judged with regard to the applicant’s condition, as it was at the time of the issue of the minor injuries compensation certificate, disregarding events subsequent thereto which might make the extent of injury or the extent of loss of earning capacity greater than it was thought to be at the time of the issue of the certificate. This is sensible given the dual needs for finality and speedy determination.

No complaint may well have been made about the certificate if not for the fact that, subsequent to its issue, he suffered a recurrence of low back pain in August or September 1990 which required medical treatment and led to the grant of further sick leave certificates from then onwards up to the time of the hearing of these applications.

Dr Daniel Wu and Dr Yeung Po Sum both agreed that the applicant now suffers from a substantial loss of earning capacity — Dr Yeung[1992] 1 HKC 246 at 251assessed the loss at 20% while Dr Wu assessed it as ranging from 20–25%. There was some controversy about whether or not this loss was caused by the accident at work on 9 September 1989, or whether an incident in August or September 1990 gave rise to the recurrence of low back pain and caused or contributed to the substantial loss of earning capacity or, to put it another way, whether that incident constituted a novus actus interveniens. This issue would require my adjudication were I to accede to the application to cancel the certificate and determine compensation afresh.

Turning therefore, to the application to cancel, the issues for my determination on this application are, firstly, whether or not the assessment of 21/2% loss of earning capacity was correct at the relevant time and secondly, whether or not the certificate was issued in ignorance of or under a mistake as to, the true nature or the extent of the injury.

Was the assessment of 2½% loss of earning capacity correct as at 24 July 1990?

I assume, for the purpose of determining this issue, that the certificate was not issued in ignorance of or under a mistake as to, the true nature or the extent of the injury. The injury in question, a sprained back, is not specified in the First Schedule to the Ordinance. I infer that when it reviewed the original assessment the Board purported to ascertain, firstly, pursuant to s 9(1) of the Ordinance, whether permanent partial incapacity resulted from the injury and, then, upon reaching an affirmative conclusion on this enquiry, purported to assess, pursuant to s 9(1)(b), the percentage of loss of earning capacity caused by the injury and issued its certificate of review of assessment accordingly.

The question I have to address is whether or not the assessment of 21/2% loss of earning capacity was in accordance with the provisions of the Ordinance, particularly, s 9(1)(b) thereof and remained valid, given those provisions, at the time of the issue of the minor injuries compensation certificate on 24 July 1990, having regard to the condition of the applicant and his ability to work at that time.

Dr Yeung who was called by the respondent to give evidence, did not, either in his evidence or in his report, directly address this issue.

It was common ground that the applicant suffered from scoliosis (a curved spine) and pre-existing degenerative changes of the spine even before the accident on 9 September 1989. The applicant did not give evidence about the condition of his back prior to September 1989 but he had told Dr Wu who had examined him on 28 May and 29 August 1990 as well as Dr Yeung who had examined him on 22 May 1990, that his back had been asymptomatic before this accident.

Dr Wu who was called by the applicant to give evidence, accepted this statement at face value but said that he could not objectively assess the correctness of this assertion. Dr Yeung however, found it hard to accept[1992] 1 HKC 246 at 252this assertion. He had regard to the extent of the degenerative changes in the spine and formed the opinion that the applicant most probably suffered from some pain even before September 1989. Dr Yeung however, did not know whether the pain was mild or how severe it might have been, or how frequently it recurred, or more importantly, whether it would have impaired his ability to work.

In the absence of direct testimony from the applicant on this point, I find it extremely difficult to reach a finding on it. If required to do so, I would conclude, on a balance of probabilities, having carefully weighed all the relevant evidence, that the applicant suffered from some mild pain even before the accident but I do not think that it is necessary to do so because of my finding, which I can confidently make on the evidence, that the applicant was able to work full time and for a full month before the accident despite the degenerative changes in and condition of his back and any pain he might have suffered as a result of it.

The applicant was granted sick leave certificates up to 8 January 1990. He gave evidence that he returned to work on construction sites but not until sometime in March 1990 and then, for only about 10–15 days a month as opposed to 30 days a month when he had worked for the respondent. He did not, in his evidence, expressly explain why he could not return to do a full month’s work.However, he did rely on and confirm the truth of the grounds of his objection to the initial assessment of 2% loss of earning capacity, namely, that his feet were always numb, the pain returned whenever he was not mindful of the injury, he could not sleep at night and needed pain killers (p 4 of the respondent’s bundle). Those statements however, were inconsistent with his direct testimony that he did not consult a doctor anymore, after he had returned to work, not until sometime in August 1990. I understood the applicant to mean, by that evidence, that he did not need to consult a doctor until August 1990.

He did not expressly say in evidence that he suffered from a recurrence of back pain then and he did not give evidence of any incident giving rise to the same. He had told Dr Wu however, that he had again strained his back at work in September 1990 but this time as a result of shovelling for a long period of time. He had also told Dr Yeung that he suffered from an exacerbation of back pain in August 1990 without an accident. It is clear that both statements refer to the same matter, the exact date of which is not important, but I infer from the sick leave certificate granted on 23 August 1990 by a medical officer of the United Christian Hospital stating that the applicant suffered from a back sprain that there was a recurrence of back pain then.

What is more important is that he had told Dr Wu that it had taken a few months of resting and therapy (after the September 1989 accident) before he was able to get better and return to work and that his back had then been fine until September 1990.[1992] 1 HKC 246 at 253

This evidence is consistent with the evidence of Dr Ho who had treated the applicant from sometime in September 1989 up to 8 January 1990, when he had advised the applicant to start work and to attend an assessment by the Board. The applicant had told him that he had enjoyed gradual relief from the treatment (p 39 of the trial bundle).

Dr Wu was asked expressly in correspondence whether the applicant was fully cured when he went back to work (p 59 of the trial bundle) to which Dr Wu responded:

Only the doctor who had been attending and examined his back prior to his return to work would be most qualified to answer this question, otherwise, it is more of an opinion than fact. My opinion is that his back condition was as what he claims to be unless he can be proven otherwise.

The applicant claimed to Dr Wu that his back was fine when he returned to work.

In the light of the evidence of Dr Ho, his statement to Dr Wu, his evidence that he did not require medical attention during the period when he had returned to work and having carefully weighed the relevant evidence on point, I find that the applicant was able to return to his former work, full time and for a full month, after the expiry of his sick leave certificates on 8 January 1990, regardless of whether he in fact, chose to do so or not. Surprisingly, members of the Board who conducted the review and issued the certificate of review of assessment were not called to give evidence on either of the issues I have to resolve on the application to cancel the minor injuries compensation certificate. The fact that the certificate of the Board is admissible as evidence of its contents, by virtue of s 16H, is no reason not to call its members, particularly, when one wants to overturn the certificate and not rely on it. This was not an appeal from an assessment made by the Board or a straightforward application for compensation where the practice is not to call the members of the Board but to call other medical evidence, which the court often accepts, although it differs from the assessment of the Board, because the latter is not supported by reasons. In this case, not only were the members of the Board not called, the medical evidence did not, either directly or clearly, address the issue under consideration.

I remind myself that a court can only judge an assessment by testing the validity of its conclusions against the total evidence available ( Chan Kam v Standard Chartered Bank Hong Kong Trustee Ltd 1988 HKC 345.

I return to the question I posed in the second paragraph to this section. Section 9(1) provides for compensation to be awarded where permanent partial incapacity ‘results’ from the injury. Section 3 defines permanent partial incapacity to mean ‘such incapacity (which may include disfigurement) as reduces his earning capacity, present or future, in any employment which he was capable of undertaking at that time’.[1992] 1 HKC 246 at 254

In the light of my earlier findings, particularly, that the applicant was able to return to full time work before August 1990 and in the absence of any evidence or material to contradict the Board or to suggest that it was wrong for the Commissioner of Labour to assess compensation on 24 July 1990 based on an assessment of loss of earning capacity of 21/2%, I conclude, so far as the earning capacity of the applicant on 24 July 1990 was concerned (that is to say, his then or ‘present’ earning capacity), that the applicant has failed to satisfy me that the amount assessed was not in accordance with the provisions of the Ordinance and, in particular, s 9(1)(b) thereof. The question of special circumstances, which s 9(lA) directs the court to have regard to, does not arise in view of my finding that the applicant was able to return to his former employment on construction sites. I find further, irrespective of whether or not the Board was ignorant of or mistaken about the true nature or extent of the injury and so far as his ‘present’ loss was concerned, that is to say, the reduction of earning capacity on 24 July 1990 and not taking into account any future or any potential for future reduction that the percentage of loss of earning capacity permanently caused by the injury sustained on 9 September 1989, in any employment which the applicant was capable of undertaking at that time, did not exceed 21/2% as of 24 July 1990.

There is another point to consider which was forcefully put by Mr Emerson and it is this: whilst the assessment may have been correct when regard was had to his current condition, given the fact that his back was then fine and he was able to return to work, the assessment was not in accordance with the Ordinance because it did not take into account the fact that this injury made him vulnerable to further deterioration, which could come about by itself or as a result of further injury, and which would substantially reduce his earning capacity. In other words, whilst an assessment of 21/2% may have been correct so far as his then or ‘present’ loss of earning capacity was concerned, it was too low having regard to the potential for further deterioration and the likelihood of suffering from a ‘future’ loss of earning capacity. In fact, the events that have occurred since 24 July 1990 have translated the potential for future loss into an actual loss of earning capacity of about 20–25% at the time of the hearing. I shall return to this point after considering the next issue.

Was the certificate issued in ignorance of or under a mistake as to, the true nature or the extent of the injury?

The focus of the enquiry here was, whether the Board appreciated the extent of the injury. The Board clearly appreciated the true nature of the injury the applicant suffered from, namely, a sprained back. In fact Dr Wu, who regarded sprains as being more serious, suggested that the applicant had suffered from a less serious strained back. However, whether one calls it a sprained back or a strained one, I find that neither the Board[1992] 1 HKC 246 at 255nor the Commissioner of Labour were ignorant of or mistaken about the true nature of the injury (cf Tung Shui Bun v Gammon Building Construction Ltd).

The failure to call members of the Board on this issue was even more surprising since they could have given direct evidence on what they took or did not take into account, when they assessed the applicant’s loss of earning capacity and whether or not they appreciated the applicant’s pre-existing condition and vulnerability to future injury. In the absence of direct evidence, I must turn to the other evidence, some of which I have already referred to above, to decide whether or not the Board appreciated the extent of the injury sustained on 9 September 1989. The onus on this issue rested with the applicant, as it did on the first issue.

As was the case with the first issue, the evidence relevant to this issue was sparse. Dr Yeung’s report did not refer to the assessment by the Board nor did he address, in his evidence or in his report, the question whether or not the Board had been mistaken regarding the extent of the injury suffered.

Dr Wu was expressly asked in correspondence (p 60 of the trial bundle) whether the original injury was more serious than at first thought, to which he answered no (p 66 of the trial bundle). That answer may well have been conclusive had he been asked expressly whether or not the extent of the original injury was more serious than at first thought. Be that as it may, he conceded in evidence that there was a possibility that the Board might have misunderstood the quantity of the injury sustained. He did not go on to suggest that the Board had actually, or probably, done so. On the contrary, Dr Ho, boldly and without any hesitation, asserted that the certificate of review of assessment (p 37 of the trial bundle) recorded the full extent of the injury suffered by the applicant as known on that day, 7 June 1990. As Dr Wu conceded, Dr Ho would be in the best position to speak of the applicant’s condition when he went back to work.

The Board may have been mistaken regarding the extent of the injury sustained in September 1989 in one or more of the following ways:

(a) it failed to appreciate that the injury could and was likely to cause or contribute to the development of a chronic condition of low back pain such as would further incapacitate the applicant from work; or

(b) it failed to appreciate that the injury could and was likely to result in a relapse or a recurrence of low back pain such as would further incapacitate the applicant from work; or

(c) it failed to appreciate the applicant’s pre-existing condition and, further, or alternatively, that the extent of the injury was, or was likely to be worse, by reason of the pre-existing condition.

The above is not intended to be a comprehensive list but a restatement of the matters raised during the hearing and in final submissions.[1992] 1 HKC 246 at 256

I infer, first of all, that the Board had in its possession the record and notes of the applicant’s admission to and treatment by the doctors, including Dr Ho of the United Christian Hospital. From this, I find that the Board was aware that the applicant suffered from degenerative changes in his lower spine and from scoliosis which, in any event, would have been observable on physical examination of the applicant.

From this finding, I proceed to consider what brought about the recurrence of low back pain in August 1990. Four possibilities were explored on the evidence; the development of a chronic back condition, a relapse of the original injury, a relapse of the pre-existing back condition, a further injury in August 1990.

If the injury brought about the development of a chronic back condition resulting in a loss of earning capacity of about 20–25% then, the Board obviously failed to appreciate the extent of the injury because it should have assessed a higher loss of earning capacity to cater for this development. Likewise, if there was a relapse of the original injury resulting in this substantial loss of earning capacity. However, the evidence does not support either of these two possibilites and I reject both of them.

The medical evidence, as I understood it, only made out a case for the last two possibilities.

Dr Ho’s answer to my question, whether he ascertained what had caused the problem in August 1990, was that it was a reactivation of a chronic problem. At first blush, this answer seems to support the first possibility referred to above. However, I understood this evidence in the context of his overall evidence to mean that the recurrence of pain in 1990 was a relapse of his pre-existing chronic back problem. He had earlier in his evidence disagreed with Mr Emerson’s suggestion that a single sprain could develop into a chronic back problem and said that a single sprain usually healed within six months. Just preceding the statement that it was a reactivation of a chronic problem, he said that the damage had already been there, the twist (in September 1989) exaggerated it and had some significance. His evidence therefore, whilst not ruling out the fact that the injury in September 1989 had some causal significance, was that the recurrence in August 1990 was a relapse of a pre-existing condition.

Dr Yeung was of the same opinion. He stated in his report (at pp 49–50 of the trial bundle):

These conditions are long standing and cannot occur after the accident (in September 1989). With his severe degeneration, he is expected to have back pain at anytime. I do not think the accident is a significant cause to his back problem (he conceded under cross-examination that it was ‘some cause’ albeit not significant) … (The applicant) had exacerbation of back pain without an accident (in August 1990). This is a typical kind of degenerative spine. Patient may feel better after rest but exacerbation is common. Without the ‘accident’ (in August 1990), (the applicant) is expected to have back pain anytime.[1992] 1 HKC 246 at 257

Dr Wu gave evidence that it was possible for a degenerated but asymptomatic back to sustain a sprain in September 1989 and develop into a chronic condition the next summer. He continued to say that the degenerative condition might not become symptomatic until it developed into a more advanced stage. I understood this to mean that the sprain might accelerate the onset of symptoms. However, whilst he agreed with this possibility, he did not support it because his conclusion was that the applicant had suffered two strain injuries to his lower back for which he assessed a loss of earning capacity of 20–25%. He expanded on the reasons for arriving at this conclusion in his second report where he stated (at p 65 of the trial bundle) that the deterioration in his health was not likely to be the reason for his second injury (meaning the recurrence of pain in August 1990) but that, since his back pain after the second incident was very similar to the first, it (that is, the second incident) was probably a re-injury of the same previously injured and weakened area of his back.

Having carefully considered the medical evidence, I find, on a balance of probabilities, that Dr Wu’s conclusion as to the cause of the recurrence of pain in August 1990 is correct and I accept it. In doing so, I take into account and rely upon the admission made by the applicant that the pain recurred when he strained his back at work by shovelling for a long time. Injury suffered in the course of a process of work is not necessarily suffered as a result of an ‘accident’, either within the ordinary meaning of the word or its meaning under the Ordinance, and I do not find any inconsistency between the applicant’s statements to Dr Wu and his statement to Dr Yeung that the pain recurred without ‘an accident’.

I also accept Dr Wu’s evidence (at pp 64–65 of the trial bundle) that the degenerated back of the applicant was already more susceptible to injury as compared to a normal back because of the pre-existing degeneration as well as the applicant’s occupation in construction work and that the area that was injured in September 1989 was made even more vulnerable than before. This increased risk was realized when the same area suffered a re-injury in August 1990 resulting in a loss of earning capacity of about 20–25%.

Dr Ho and Dr Yeung did not disagree that the September 1989 injury would have made the degenerated back even more vulnerable. Dr Ho conceded that the September 1989 injury had ‘some significance’ and Dr Yeung conceded that it was a cause, although not a significant cause, of his back problem.

The vulnerability point, if I may call it that, was neither novel nor startling. It was expressly and readily accepted by Dr Ho when he gave evidence that the effect of an injury was relative to whether it had been sustained by a healthy spine or an unhealthy one. Dr Yeung was not asked about it. He tacitly accepts it because he concedes that his September 1989 injury was a cause of his subsequent back problems.Having regard to this evidence and in the absence of evidence from members of the[1992] 1 HKC 246 at 258Board, I am not prepared to find that they failed to appreciate the extent of the injury because they failed to appreciate that it made the previously degenerated back even more susceptible to injury (cf Lee Chung Tai v Kowloon Motor Bus Co (1933) Ltd 1988 HKC 334. If Dr Wu, Dr Ho and Dr Yeung who probably would have confirmed this if he had been asked, appreciated the point, I can find no reason to suggest that the members of the Board would have failed to do so.

None of the doctors suggested that the recurrence of pain in August 1990 was a relapse of the original September 1989 injury. Nor did they suggest that such a relapse of the original injury was possible. Members of the Board cannot, therefore, be criticized for failing to consider this possibility, even if I were to find, which for the reasons given above I am not prepared to do, that they in fact failed to consider it.

This leads me to a consideration of the final matter raised above, namely, whether the Board failed to appreciate that the injury could result in the development of a chronic back problem or accelerate such development and thus, cause further loss of earning capacity. Although I have found that this did not occur in the present case, the possibility of its occurrence was accepted, albeit not too enthusiastically, by both Dr Wu and Dr Ho. Dr Yeung did not express an opinion on this point.I find that if the members of the Board had failed to appreciate this possibility or to take it into account, then, they would have failed to appreciate the extent of the September 1989 injury. However, I am not prepared to do so for the same reasons that I have given above.

I now return to what I perceive to be Mr Emerson’s strongest point.

Was an assessment of 21/2% too low given the applicant’s vulnerability to further injury?

21/2% would appear to be too low, at first blush, because a year or so later, the applicant’s actual loss of earning capacity was ten times greater, at 20–25% and perhaps, even greater than that if one takes into account such special circumstances of the applicant if any, that may be found to exist and to increase the percentage of loss (s 9(lA) of the Ordinance).

However, s 9(1) directs the Board, as well as the court, to assess the permanent partial incapacity which results from the injury complained of, not from a pre-existing condition or from a future re-injury. The Board did not have the benefit of hindsight and indeed, should not be affixed with knowledge of subsequent events. The assessment of loss of earning capacity must be made as at 24 July 1990 with the knowledge that the applicant has recovered from the injury and is able to return full time to his former employment. It is an assessment of the potential for suffering from future loss of earning capacity. The future loss was not a certainty and may never have occurred. Strictly speaking, this potential was always there because[1992] 1 HKC 246 at 259of his pre-existing back condition. So it is an assessment of the increased potential for future loss which resulted from the injury sustained in the September 1989 accident. This injury made the back even more vulnerable to future damage. The translation of this increased vulnerability into a percentage of loss of earning capacity, bearing in mind that the future loss may never occur and if it does, the applicant may recover from it as he did from the September 1989 injury, is almost speculative and very difficult without the assistance of medical expert testimony.

No such evidence was led before me although an attempt had been made to ask Dr Wu to reconsider the assessment of 21/2% (p 60 of the trial bundle). His answer, that 20% loss of earning capacity was still his estimation (p 66 of the trial bundle), missed the point because that loss had to be assessed as at 24 July 1990 before the recurrence of pain in August that year.

What is clear to me however, is that the increased potential for suffering from future loss of earning capacity caused by the September 1989 injury, cannot be great given the overall scheme of things and the role played or to be played, in the event that this contingency became a certainty, by his pre-existing back condition, future injury to the back or re-injury to the same area and the body’s natural ability to heal. From a purely personal and non-expert point of view, I have misgivings that 21/2% is perhaps, on the low side despite the substantial discounts one has to make to reflect future contingencies and pre-existing predisposition. However, and unfortunately from the applicant’s point of view, I am not satisfied, on a balance of probabilities, and the onus on this issue is clearly on the applicant, that an assessment of 21/2% loss of earning capacity as at 24 July 1990 was not in accordance with the provisions of the Ordinance.

I therefore, refuse the application to cancel the minor injuries compensation certificate.

Application for compensation

Despite not setting aside the minor injuries compensation certificate, it may be proper for me to proceed, nevertheless, to assess compensation afresh, on the assumption that I may have been wrong not to cancel the certificate. However, I refrain from doing so, given the paucity of evidence on point, and would prefer to leave that assessment and the question of whether or not there was a novus actus interveniens in August 1990 to be addressed by another court, should a late application for leave to appeal from the decision of the Commissioner of Labour resulting in the issue of the minor injuries certificate be lodged pursuant to s 18 and should leave be granted, despite the lateness of such application. The time I have taken to deliver this judgment, for which I apologize to the parties, should not of course, be taken into account were such an appeal to be lodged.[1992] 1 HKC 246 at 260

Had I set aside the certificate and proceeded to assess compensation, I would have concluded that my assessment of compensation should take into account events occurring up to the hearing of the application for compensation (cf McGregor on Damages (15th Ed) para 1429).

Reported by Danny Choi

JOHNSON AND ANOTHER RESPONDENTS AND AGNEW APPELLANT

[HOUSE OF LORDS]

1978 Dec. 11, 12, 13, 14, 18, 19, 20; 1979 March 8

Lord Wilberforce, Lord Salmon, Lord Fraser of Tullybelton, Lord Scarma

Vendor and Purchaser – Specific performance – Alternative remedies – Purchaser’s failure to comply with order for specific performance – Sale by mortgagees – Vendors claiming difference between purchase price and sum realised by mortgagees – Alternative claim by vendors for damages – Chancery Amendment Act 1858 (21 & 22 Vict. c. 27), s. 2 1

In November 1973, when they were in arrears with the repayments of mortgages on their properties, the plaintiff vendors entered into a written agreement for the sale of the properties. The price agreed to be paid by the purchaser under the agreement was in excess of the sums required to discharge the mortgages and a loan raised by the vendors to enable

• 1     Chancery Amendment Act 1858, s. 2: “In all cases in which the court of Chancery has jurisdiction to entertain an application… for the specific performance of any covenant, contract, or agreement, it shall be lawful for the same court, if it shall think fit, to award damages to the party injured, either in addition to or in substitution for such… specific performance, and such damages may be assessed in such manner as the court shall direct.”

[1980] A.C. 367 Page 368

them to buy another property. The purchaser failed to complete, and in November 1974 the vendors obtained a summary order for specific performance. In July 1975, the order for specific performance not having been carried out, the mortgagees of the properties enforced their securities by selling the properties. The proceeds realised by the mortgagees were insufficient to discharge the mortgages in full, and the vendors moved for an order that the purchaser should pay the balance of the purchase price to the vendors, credit being given for the sums realised by the mortgagees’ sales. The judge made no order on the motion. The Court of Appeal allowed the vendors’ appeal, holding that the order for specific performance should be discharged and damages awarded in lieu.

On appeal by the purchaser: –

Held, dismissing the appeal, (1) that although a vendor had to elect at the trial whether to pursue the remedy of specific performance or that of damages, if specific performance was ordered the contract remained in effect and was not merged in the judgment, so that, if the order was not complied with, he might apply to the court to put an end to the contract and, if he did so, he was entitled to damages appropriate to the breach of contract (post, pp. 392F-G, 393F, 394D-E, 397H – 398B, 399D-E).

Henty v. Schröder (1879) 12 Ch.D. 666; Barber v. Wolfe [1945] Ch. 187; Horsler v. Zorro [1975] Ch. 302 and Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319, C.A. overruled.

McKenna v. Richey [1950] V.L.R. 360 applied.

(2) That, although damages might be awarded under section 2 of the Chancery Amendment Act 1858 in some cases in which they could not be recovered at common law, the Act did not warrant the assessment of damages otherwise than on a common law basis, and in the case of breach of a contract of sale, if the innocent party reasonably tried to have the contract completed, damages should be awarded as at the date when the contract was lost, so that in the present case the date for the assessment of damages should be that on which the remedy of specific performance became aborted (post, pp. 400B-C, G – 401A, C-E).

Decision of the Court of Appeal [1978] Ch. 176; [1978] 2 W.L.R. 806; [1978] 3 All E.R. 314 affirmed.

The following cases are referred to in their Lordships’ opinions:

Austins of East Ham Ltd. v. Macey [1941] Ch. 338, C.A.

Barber v. Wolfe [1945] Ch. 187; [1945] 1 All E.R. 399.

Barker (John) & Co. Ltd. v. Littman [1941] Ch. 405; [1941] 2 All E.R.

Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339, C.A.

Buckland v. Farmar & Moody [1979] 1 W.L.R. 221; [1978] 3 All E.R. 929, C.A.

Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319; [1976] 2 W.L.R. 822; [1976] 1 All E.R. 881, C.A.

Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26.

Ferguson v. Wilson (1866) L.R. 2 Ch.App. 77.

Grant v. Dawkins [1973] 1 W.L.R. 1406; [1973] 3 All E.R. 897.

Hall v. Burnell [1911] 2 Ch. 551.[1980] A.C. 367 Page 369

Harold Wood Brick Co. Ltd. v. Ferris [1935] 1 K.B. 613; [1935] 2 K.B. 198, C.A.

Henty v. Schröder (1879) 12 Ch. D. 666.

Heyman v. Darwins Ltd. [1942] A.C. 356; [1942] 1 All E.R. 337, H.L.(E.)

Hickman v. Haynes (1875) L.R. 10 C.P. 598.

Holland v. Wiltshire (1954) 90 C.L.R. 409.

Horsler v. Zorro [1975] Ch. 302; [1975] 2 W.L.R. 183; [1975] 1 All E.R. 584.

Hutchings v. Humphreys (1885) 54 L.J.Ch. 650.

Hythe Corporation v. East (1866) L.R. 1 Eq. 620.

Jackson v. De Kadich [1904] W.N. 168.

Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851, H.L.(E.).

Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331; [1972] 2 W.L.R. 1175; [1972] 2 All E.R. 393, H.L.(E.).

McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457.

McKenna v. Richey [1950] V.L.R. 360.

Malhotra v. Choudhury [1980] Ch. 52; [1978] 3 W.L.R. 825; [1979] 1 All E.R. 186, C.A.

Mayson v. Clouet [1924] A.C. 980, P.C.

Morel Brothers & Co. Ltd. v. Earl of Westmorland [1904] A.C. 11, H.L.(E.).

Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275; (1868) L.R. 3 Q.B. 272.

Radford v. De Froberville [1977] 1 W.L.R. 1262; [1978] 1 All E.R. 33.

Rock Portland Cement Co. Ltd. v. Wilson (1882) 52 L.J.Ch. 214.

Scarf v. Jardine (1882) 7 App.Cas. 345, H.L.(E.).

Singh (Sudagar) v. Nazeer [1979] Ch. 474; [1978] 3 W.L.R. 785; [1978] 3 All E.R. 817.

Sweet v. Meredith (1863) 4 Giff. 207.

United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1; [1940] 4 All E.R. 20, H.L.(E.).

Watson v. Cox (1873) L.R. 15 Eq. 219; 42 L.J.Ch. 279.

Wroth v. Tyler [1974] Ch. 30; [1973] 2 W.L.R. 405; [1973] 1 All E.R. 897.

The following additional cases were cited in argument:

Bain v. Fothergill (1874) L.R. 7 H.L. 158, H.L.(E.).

Baker v. Williams [1893] W.N. 14; 62 L.J.Ch. 315.

Betts v. Gallais (1870) L.R. 10 Eq. 392.

Biggin v. Minton [1977] 1 W.L.R. 701; [1977] 2 All E.R. 647.

Bosaid v. Andry [1963] V.R. 465.

Carrick v. Young (1819) 4 Madd. 437.

Chapman, Morsons & Co. v. Auckland Union Guardians (1889) 23 Q.B.D. 294, C.A.

Clark v. Wallis (1866) 35 Beav. 460.

Davenport v. Rylands (1865) L.R. 1 Eq. 302.

De Brassac v. Martyn (1863) 9 L.T. 287; 2 New Rep. 512.

Denmark Productions Ltd. v. Boscobel Productions Ltd. [1969] 1 Q.B. 699: [1968] 3 W.L.R. 841; [1968] 3 All E.R. 513, C.A.

Denton v. Stewart (1786) 1 Cox Eq.Cas. 258.

Dominion Coal Co. Ltd. v. Dominion Iron and Steel Co. Ltd. [1909] A.C. 293, P.C.

Dreyfus v. Peruvian Guano Co. (1889) 43 Ch.D. 316, C.A.[1980] A.C. 367 Page 370

Dutch v. Warren (1720) 1 Stra. 406.

Eastwood v. Lever (1863) 4 De G. J. & S. 114.

Elmore v. Pirrie (1887) 57 L.T. 333.

Ferguson v. Wilson (1866) L.R. 2 Ch.App. 77.

Fibrosa Spolka Akcyjna v. Fairbairn Lawson Coombe Barbour Ltd. [1943] A.C. 32; [1942] 2 All E.R. 122, H.L.(E.).

Foligno v. Martin (1853) 16 Beav. 586.

Fritz v. Hobson (1880) 14 Ch.D. 542.

Gray v. Fowler (1873) L.R. 8 Ex. 249.

Greenaway v. Adams (1806) 12 Ves. 395.

Griffiths v. Vezey [1906] 1 Ch. 796.

Hargreaves & Thompson’s Contract In re (1886) 32 Ch.D. 454, C.A.

Hindley v. Emery (1865) L.R. 1 Eq. 52.

Hipgrave v. Case (1885) 28 Ch.D. 356, C.A.

Hirji Mulji v. Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, P.C.

Howard v. Pickford Tool Co. Ltd. [1951] 1 K.B. 417, C.A.

Johnstone v. Milling (1886) 16 Q.B.D. 460, C.A.

King v. Hoare (1844) 13 M. & W. 494.

Lavery v. Pursell (1888) 39 Ch.D. 508.

Lazenby Garages Ltd. v. Wright [1976] 1 W.L.R. 459; [1976] 2 All E.R. 770, C.A.

Lowe v. Hope [1970] Ch. 94; [1969] 3 W.L.R. 582: [1969] 3 All E.R. 605.

Luck v. White (1973) 26 P. & C.R. 89.

Moses v. Macferlan (1760) 2 Burr. 1005.

Newcomb v. Bonham (1681) 2 Cas. in Ch. 58.

Phelps v. Prothero (1855) 7 De G.M. & G. 722.

Public Trustee v. Pearlberg [1940] 2 K.B. 1; [1940] 2 All E.R. 270, C.A.

Robinson v. Harman (1848) 1 Exch. 850.

Simpson v. Terry (1865) 34 Beav. 423.

Stickney v. Keeble [1915] A.C. 386, H.L.(E.).

Tamplin v. James (1880) 15 Ch.D. 215, C.A.

Tate & Lyle Ltd. v. Hain Steamship Co. Ltd. (1936) 55 L1.L.Rep. 159, H.L.(E.).

Tito v. Waddell (No. 2) [1977] Ch. 106; [1977] 2 W.L.R. 496; [1977] 3 All E.R. 129.

Todd v. Gee (1810) 17 Ves. 273.

Tredegar Iron and Coal Co. Ltd. v. Hawthorn Bros. & Co. (1902) 18 T.L.R. 716, C.A.

Ward (R. V.) Ltd. v. Bignall [1967] 1 Q.B. 534; [1967] 2 W.L.R. 1050: [1967] 2 All E.R. 449, C.A.

White and Carter (Councils) Ltd. v. McGregor [1962] A.C. 413; [1962] 2 W.L.R. 17; [1962] 1 All E.R. 1178, H.L.(Sc.).

APPEAL from the Court of Appeal.

This appeal from an order of the Court of Appeal (Buckley and Goff L.JJ. and Sir David Cairns) dated December 13, 1977, raised two principal questions for decision: (1) Is a remedy in damages available to the vendor of land who takes an order for specific performance which by reason of the purchaser’s continued default proves abortive? (2) If so, and if the property has diminished in value between the contractual completion date and the date on which the vendor abandons his order for specific performance, by reference to what point in time is the vendor’s loss to be measured? The former question required consideration of whether in the given situation[1980] A.C. 367 Page 371

the remedy of damages, if available at all, was available at common law or under the Chancery Amendment Act 1858 (Lord Cairns’ Act) or both, and the second question required consideration whether the measure of damages under Lord Cairns’ Act was different from that at common law.

The respondents in this appeal, Michael Charles Johnson and Renee Marie Johnson, were on November 1, 1973, the owners of a property known as Sheepcote Grange, Woodburn Common, Mitcham, Buckinghamshire. They had mortgaged the property as security for moneys lent to them in two separate parts. Upon Sheepcote Grange itself there was a first legal charge to the Provincial Building Society to secure a principal sum of £15,600 and interest thereon, a second legal charge to Economic Insurance Co. Ltd. to secure a principal sum of £4,400 and interest thereon, and a third legal charge to Barclays Bank Ltd. to secure payment on demand of all sums due to it. On the other part of the land, referred to as the grazing land, there was a first legal charge to Arrowfield Finance to secure the principal sum of £6,000 and interest thereon and a second legal charge to Barclays Bank Ltd. to secure payment on demand of all sums due to it. In the latter part of 1973 the respondents found themselves in difficulty in meeting all their financial commitments and had fallen somewhat in arrear with their mortgage repayments. They therefore placed Sheepcote Grange, including the grazing land, on the market and by a contract dated November 1, 1973, the appellant, Adeline Agnew, agreed to buy it for £117.000. The contract was made by reference to the Law Society’s General Conditions of Sale (1973 Revision) and it provided that the appellant should pay a deposit of £11,700 and that completion should take place on or before December 6, 1973. In fact the appellant was allowed to pay only £3,000 by way of deposit.

At an auction held later on November 1, 1973, the respondents agreed to buy a property known as Wyebridge Stores, Coves End Road, Bourne End, Buckinghamshire, for £34,000 and this purchase was duly completed in December 1973, the entire purchase money being provided by Barclays Bank Ltd. who were given a legal charge on that property also.

Had the appellant completed her purchase of Sheepcote Grange on December 6, 1973, or at any time before the property was sold by the mortgagees, the respondents could have repaid all their creditors, both secured and unsecured, and would have been left with a surplus of several thousand pounds after doing so.

The facts are stated in the opinion of Lord Wilberforce.

J. H. Hames Q.C. and J. K. S. Denniston for the appellant. The Court of Appeal was right in holding that the vendors, by their election to enforce the contract have made an irrevocable choice, but it was wrong in holding that, despite that choice, the court had power to award them damages under the Chancery Amendment Act 1858 (Lord Cairns’ Act). If the Court of Appeal were right the court would have jurisdiction to discharge an order for specific performance already made from which there was no appeal and that is not so. All the rights of the respondents under the contract, including their right to damages for the appellant’s failure to complete, have merged in the order for specific performance and cannot be revived. Mere non-compliance with an order is not a[1980] A.C. 367 Page 372

ground for discharging an order. Even assuming that there was jurisdiction to do so it would have been wrong to discharge the order in this case. Even if it were validly discharged, it would be wrong for the court to award damages under Lord Cairns’ Act. As a matter of jurisdiction the power to make an order under that Act does not create a new type of damage. Damages are either compensatory damages as at common law, or are of a proprietary nature as in equity. In the present case it would have been wrong to exercise that discretion in favour of the vendors. If the court awarded damages here under Lord Cairns’ Act they would be compensatory in their nature, like common law damages, and damages under the Act are not such damages.

The question arises whether an election is the exercise of a right (as the appellant contends) or of a remedy (as the respondents contend). An election is a choice between incompatible rights, irrevocable by reason of its consequences. In Tomlins’ Law Dictionary (1793) “remedy” is correctly defined as the action or means given by law for the recovery of a right. Reliance is placed on the second definition of “right” in Stroud’s Judicial Dictionary, 4th ed., vol. 4 (1974), p. 2394, as the challenge or claim for a thing taken wrongfully.

When vendors are dependent on the receipt of the purchase money they should tell the purchaser and make it a condition of the contract. Here the purchaser did not and could not know the particular importance which the vendors were attaching to the receipt. The facts in this case do not support the inference that the purchaser could not have failed to realise that the failure to complete the purchase punctually would be a major factor contributing to the enforcement of the mortgagees’ securities so as to debar the purchaser from contending that the vendors were responsible for the sales by the mortgagees.

The purchaser failed to complete on the contractual date and at that point of time the vendors were entitled as of right to claim damages for breach of contract or they had a right to ask for specific performance. They did neither, but 15 days later served notice to complete. The purchaser failed to complete on January 21, 1974, in accordance with the notice, the last fault which can be laid at her door. At this stage the vendors could have sold the property to a third party. Instead they claimed specific performance. They could also have treated the contract as repudiated. But by going to the court they were allowing the court to provide new machinery for completion. They gave no indication of urgency and did not mention their financial troubles. In June 1974 the master made an order for specific performance. The vendors had proceeded in a leisurely way. When the purchaser realised that she was in breach she tried to complete and in October 1974 she had every reason to believe that she could raise the finance. The vendors took no steps to implement the order of 1974. That was not the fault of the purchaser. It was not unreasonable of the purchaser to assume that they had abandoned it. It was not her fault that the mortgagees exercised their powers of sale. It was the duty of the vendors to protect the property for the purchaser. In that they did not do so they were in breach of their duties as trustees.

It is submitted: (1) as a matter of general law one must distinguish between an ordinary and a repudiatory breach of contract; the former only[1980] A.C. 367 Page 373

gives the plaintiff a right to damages but both the plaintiff and the defendant continue to be bound by their respective contractual obligations as the contract continues in law.

1.  (2)     As a matter of general law repudiatory breach of contract gives the innocent party a legal right either (i) to keep the contract alive, thus continuing to hold himself out as intending to perform his contractual obligations and holding the other party to his, or (ii) alternatively to treat himself as freed from any further obligation under the contract and to claim damages. Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 349, 350. The contract is not at an end for all purposes, e.g. an arbitration clause may still be enforced.
2.  (3)     The right to elect between these alternatives arises the moment the repudiatory breach has been committed, though it is necessarily exercised after the breach. The right to elect arises before it is actually exercised and therefore cannot be the exercise of a remedy; it is the exercise of a right. It is a corollary of the previous proposition that the right arises before the election.
3.  (4)     Having made his election, the vendor may or may not need the remedies made available for the implementation of his rights. If he elects to affirm the contract he faces the problem that there is no contractual machinery to fix a date for completion. The parties could agree that completion should take place at any date. Alternatively, the vendor could apply to the court and by issuing a writ for specific performance indicate his readiness to complete on a date decreed by the court.
4.  (5)     As one would expect, an election between incompatible rights gives rise to consequences at law that are themselves incompatible, so that the vendor who affirms the contract not only indicates to the purchaser that he intends the purchaser to comply with his obligations but also that the vendor himself will comply with his obligations. Thus he must preserve the land as trustee for the purchaser. If the vendor elects to treat the contract as at an end, the trust determines and from then onwards he holds the land beneficially for himself free from contractual obligations. He also has the right to monetary compensation on the basis that the contract has been wrongfully brought to an end by the purchaser; that right to damages arises from the moment when the election takes place.
5.  (6)     If the vendor elects to affirm the contract he does not waive the repudiatory breach of contract but merely the right to treat it as a repudiatory breach, so that in a sense he has waived the repudiatory consequences, and the damages are assessed on the basis that the contractual obligations are at an end.
6.  (7)     The fact that the court has power to award damages, whatever jurisdiction that power stems from (the common law or Lord Cairns’ Act), does not alter the legal facts, (i) the consequences that flow in law from the breach of contract, whether ordinary or repudiatory, (ii) the need in the case of a repudiatory breach for an election and (iii) the consequences that flow from the election.
7.  (8)     What amounts to an election is a question of fact involving the application of principles of law. It can be express or implied but it must be unequivocal and a vendor who expressly or impliedly continues to press for fulfilment of the contract by the other party after knowledge of a

[1980] A.C. 367 Page 374

1.  repudiatory breach is deemed to have elected to affirm the contract. The issue of a writ for specific performance has been held not to be unequivocal enough to constitute an election but obtaining an order for specific performance has been held to constitute an unequivocal election to affirm the contract. Here the vendors made their unequivocal election when they obtained judgment in June 1974. The latest possible date is when the judgment was entered.
2.  (9)     There is a long-established line of authority that an election to affirm a contract, once made with knowledge of the relevant facts, is as final and irrevocable as an election to treat the contract as at an end.

The irrevocability of an election does not turn on whether or not the vendor took the wrong course. However one looks at the matter, there are important consequences, whichever way the election is made. As a consequence of the irrevocability of the election, vendors who elect to affirm a contract can never again rely on the original repudiatory breach of contract to treat the contract as at an end, though a situation may arise when a further repudiatory breach may give the right to treat the contract as at an end. But in the present case reliance is placed only on the first repudiatory breach. Save in two reported cases the court has never allowed a party who has elected to affirm a contract to go back to reliance on the original breach.

The following authorities are relied on: Halsbury’s Laws of England, 4th ed., vol. 9 (1974), pp. 383-385, paras. 556-558; Williams on Vendor and Purchaser, 4th ed., vol. 2 (1936), pp. 1025-1026; Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26; Scarf v. Jardine(1882) 7 App.Cas. 345; Johnstone v. Milling (1886) 16 Q.B.D. 460; Hirji Mulji v. Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, 509-510; Tate & Lyle Ltd. v. Hain Steamship Co. Ltd. (1936) 55 L1.L.Rep. 159, 173-174, 178, 182.

Once a date is fixed for completion and time is made of the essence, the purchaser, by failing to comply, is in effect repudiating the contract. He thus gives the vendor the chance to accept the repudiation and not to be bound by the contract but to hold him to liability for damages. For the purposes of election, even if it be held that there is a continuing day-by-day breach the principle of the irrevocability of the vendor’s election to go on with the contract is unaffected. Suppose a vendor has given a purchaser notice to complete on January 1, 1978, and there is no completion. If the purchaser is in continuing breach, there has been a daily repetition of it. But if on February 1 the vendor issues a writ for specific performance, then by so doing he is requiring the purchaser to complete on a day to be specified by the court itself. Assume that thereafter there is a continuing breach, say, till May 1, when the judge is ready to make an order for specific performance, the vendor may decide to go back to reliance on repudiatory breach, but, if he takes the order for specific performance, he waives all breaches up to that time. Suppose the court’s order requires completion on July 1 and the purchaser is ready to complete on that date, the vendor cannot then decide to rely on his original right to accept the repudiation. If the election is final, it must be final either way, whether the breach is continuing or not continuing. Taking an order for specific performance wipes out the previous repudiatory consequences of the breach.[1980] A.C. 367 Page 375

United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1, 3, 18-19, 21, supports the general principle that, where rights are inconsistent, then, if one chooses one, one cannot subsequently choose the other. See also Heyman v. Darwins Ltd. [1942] A.C. 356, 361, 373; Howard v. Pickford Tool Co. Ltd. [1951] 1 K.B. 417, 421 and Denmark Productions Ltd. v. Boscobel Productions Ltd. [1969] 1 Q.B. 699, 731.

The problem of considering the cases referred to in the Court of Appeal is that in hardly any of them is there any indication whether the cause of action was founded on a repudiatory breach of contract or an ordinary breach. The cases may be classified thus: (a) the cases before 1879 when the courts were prepared to grant damages without considering the question of election; (b) the cases after 1879 and (c) the modern cases in which the matter has been fully considered.

In category (a), see Foligno v. Martin (1853) 16 Beav. 586; Sweet v. Meredith (1863) 4 Giff. 207; Simpson v. Terry (1865) 34 Beav. 423; Clark v. Wallis (1866) 35 Beav. 460; Gray v. Fowler(1873) L.R. 8 Ex. 249, 255, 257 and Watson v. Cox (1873) L.R. 15 Eq. 219; 42 L.J.Ch. 279.

Category (b) starts with Henty v. Schröder (1879) 12 Ch.D. 666 where it was said that a vendor could not at the same time obtain an order to have the agreement rescinded and claim damages for breach of the agreement. There was only argument in support of the motion and the matter was never fully considered. The use of the word “rescinded” is ambiguous but the judge was using it in the limited sense of treating the contract as at an end. That which gave rise to a claim to have the order discharged was a breach of the order itself. Lord Cairns’ Act was in force but no claim was made that damages under it should be awarded. That point was not considered one way or the other.

If there is no repudiatory breach there can be no question of election. The practical problem in cases such as this, where a vendor has obtained an order for specific performance but failed to enforce it, is how to clear the title so that he is free to sell to another. Several subsequent cases can be criticised in detail but one must put oneself in the position of a judge solving that problem. In Henty’s case the court was directing its mind to that problem. All that was needed was a short declaratory judgment. But out of this problem has arisen a line of authority. In the cases the judges were reacting to a particular situation; their decisions are not always consistent but they form a pattern. See Hutchings v. Humphreys (1885) 54 L.J.Ch. 650, 652; Baker v. Williams[1893] W.N. 14; 62 L.J.Ch. 315; Hall v. Burnell [1911] 2 Ch. 551, 552, 554, 555; Public Trustee v. Pearlberg [1940] 2 K.B. 1, 8, 19, 22-23 and Barber v. Wolfe [1945] Ch. 187, 189-190. In each of these cases the court was faced with a practical problem and they reflect the desire of the vendor to be freed from the agreement so as to be able to sell the land.

Examples of category (c) are Lowe v. Hope [1970] Ch. 94; Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319, 327, 329, 331 and Biggin v. Minton [1977] 1 W.L.R. 701, 702-703.

A vendor suing for specific performance delegates to the court the task of setting a date for completion and there is no obligation on the purchaser to complete on any other date, just as there is no obligation on a purchaser to complete on any date other than that specified in a valid[1980] A.C. 367 Page 376

incentive to hasten completion but he cannot be compelled to complete earlier. If he fails to complete on the date fixed the obligation is broken once and for all. If the failure to complete were a continuing breach the purchaser could thereafter insist on completing and the vendor would be obliged to agree. But if the vendor has served a notice making time of the essence he is entitled to treat failure on the part of the purchaser as a final repudiation of the contract. If the vendor elects to treat it as bringing the contract to an end he is entitled to damages. The vendor’s rights after the breach arise by virtue of the repudiation, and the election he makes.

R. V. Ward Ltd. v. Bignall [1967] 1 Q.B. 534, 548 and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 349-350.

When a vendor has elected to affirm the contract he faces the problem that he intends to be bound by it but he has no contractual way of fixing a completion date and he must apply to the court to frame new machinery for completion and determine a new date. There was not here a continuing breach: see Luck v. White (1973) 26 P. & C.R. 89, 95-96 and Singh (Sudagar) v. Nazeer [1979] Ch. 474, 479. To suggest that there was such a breach would lead to strange results: the purchaser would be entitled to require the vendor to complete any day and presumably the vendor would be entitled to rely on it after the issue of the writ and the fixing of a date by the court, and to say that, whatever he has waived in the past, he has not waived the last day of the breach.

After the order of the court the obligations are governed by it and after that any breach cannot be a breach of contract and is a breach of the order of the court. It is on the original breach that the respondents in this case rely.

The election to affirm a contract is as irrevocable as the election to end it. In any event, the election here by the vendor in taking an order for specific performance waives the repudiatory consequences of the original breach. Nothing in Lord Cairns’ Act alters the position.

On the point of the merger of the contract with the court’s order, it is accepted that it is the general view of Chancery practitioners that there is no merger of the obligations in a contract for the sale of land and the obligations under an order for specific performance. The judgment usually says: “Let the contract be specifically performed.” This would seem to keep the contract alive and the title remains vested in the vendor. But, if it is so, it departs from the rule applicable to all other cases where the cause of action merges in the judgment: see Halsbury’s Laws of England, 3rd ed., vol. 22 (1958), p. 781, para. 1661; 4th ed., vol. 9, p. 416, para. 604 and King v. Hoare(1844) 3 M. & W. 494, 504, 507.

Here the contract merged in the order of 1974 and the court cannot subsequently award damages for breach of that contract since all the rights of the respondents under the contract, including their right to damages for the purchaser’s failure to complete, merged in the order and cannot be revised. So far as Austins of East Ham Ltd. v. Macey [1941] Ch. 338 is authority to the contrary it was wrongly decided.[1980] A.C. 367 Page 377

Alternatively, once the order for specific performance has been obtained, a plaintiff has put it into the hands of the court how the contract is to be carried out. Although it is accepted for the purposes of this particular contention (but without prejudice to the argument already submitted) that the contract itself does not merge in the order and the order is made by reference to the rights of the parties under the contract, it is the provisions of the order and not those of the contract which govern the future performance of the contract: Singh (Sudagar) v. Nazeer [1979] Ch. 474. The original breach of contract by the defendant remains relevant insofar as it gives the plaintiff a right to damages in addition to specific performance, but, since the obligations of the defendant to complete the contract are now governed by the order, the defendant does not commit any new breach capable of being treated by the plaintiff as a repudiation of the contract unless he commits a breach of the order. See Austins’ case [1941] Ch. 338, 340-341, 358.

As to discharge of an order for specific performance, such an order will not be discharged in circumstances which will cause injustice to a party to the litigation, nor where the parties cannot be put back into the same position as when the order was made, nor on the ground of the original repudiatory breach, but only by reason of a failure to comply with the order. When, as here, the vendor has put it out of his own power to convey the land it would be wrong to discharge the order and seek to put the parties back into a position which cannot be restored. Now the purchaser cannot complete because the land has been sold. The vendors did nothing to enforce the order they had obtained. The purchaser is no longer in breach of the contract or of the order of the court. The vendors could have obtained an attachment order or sequestered the purchaser’s property, but they did not. In those circumstances it would be wrong to discharge the order at their suit: see John Barker & Co. Ltd. v. Littman [1941] Ch. 405, 412.

A plaintiff who seeks specific performance always risks that the court’s order will not be complied with, but that is the case with any court order. A party seeking to have it set aside must show that he has been diligent in seeking to enforce it and cannot ask for it to be discharged simply because he has changed his mind. The reason why courts have discharged orders for specific performance of contracts for the sale of land is that the vendor wanted to sell the land to another and was in a difficulty. All that is needed in such cases is a declaration that the order shall not be enforced.

The evidence before the court indicates that the purchaser is not at fault. If her submissions on the facts are held to be wrong, she should have the opportunity to deal with the questions relating to damages under Lord Cairns’ Act by putting in further evidence.

On the question of damages there are two heads: (1) could the Court of Appeal make an order for damages under Lord Cairns’ Act in the circumstances of this case? (2) How should those damages be measured? Three possible cases arise: (a) When the court is asked to make an order for damages in addition to specific performance: that does not arise here. (b) When it is invited to make an order for damages in substitution for specific performance. (c) When the court is asked to make an order for damages after an order for specific performance has[1980] A.C. 367 Page 378

been made and in discharge of that order. It is not disputed that the court has jurisdiction under (a) and (b), but it is disputed that it has power under (c) to make such an order.

The jurisdiction to make an order for damages is exhausted once an order for specific performance has been made. In any event, when the order for damages under Lord Cairns’ Act was made the vendors were no longer owners of the land and could not have conveyed it to the purchaser. Whatever the nature of damages under Lord Cairns’ Act they are only granted as a matter of discretion and should not have been granted here. Whatever their nature, once they are granted in lieu of specific performance, they have all the characteristics of common law damages. The jurisdiction to make an order for damages in lieu of specific performance is exhausted once an order for specific performance has been made when there is no jurisdiction to make an order for damages in substitution for that order. It is a simple matter of the wording of section 2 of the Act.

The crucial words in section 2 of Lord Cairns’ Act are that when the court has jurisdiction “to entertain an application” for an injunction or for specific performance it may “if it shall think fit” award damages in addition to “or in substitution for” the injunction or specific performance. The words would not appear to cover the discharge of an order for specific performance. They suggest that the jurisdiction arises at the time the court entertains the application and not after. The damages are expressed to be in substitution for, not in lieu of, the injunction or specific performance. On the application for specific performance the court can give judgment instead. The court will not award damages under the section if the remedy of specific performance is not available to the plaintiff. The party who seeks the remedy must be in a position to get specific performance and convey the property at the time he issues his writ. If it be held that the court has jurisdiction to discharge an order for specific performance the time for that purpose must be the date of the application, i.e. when the notice of motion is served. See De Brassac v. Martyn (1863) 9 L.T. 287, 288. Davenport v. Rylands (1865) L.R. 1 Eq. 302, 307 may appear somewhat against the appellant but in the present case the vendors could not have sued at law.

Although damages in addition to specific performance may be awarded for a breach of contract which does not amount to a repudiation of the contract, damages in lieu of specific performance (i.e. damages intended to compensate the plaintiff for the failure of the defendant to complete his purchase) can only be awarded where the defendant has committed a breach of contract which the plaintiff has already elected, or is still entitled to elect, to treat as a repudiation. An award of damages under Lord Cairns’ Act in substitution for, rather than in addition to, specific performance can only be made on the footing that the plaintiff has been, or is entitled to be, discharged from his own obligations under the contract, and he cannot treat a breach of contract by the defendant as so discharging him, unless he is entitled at the date of his election to be discharged, to treat the breach as a repudiation of the contract by the defendant. There is nothing in Lord Cairns’ Act which authorises the court to ignore these basic principles of the law of contract. When the court is considering[1980] A.C. 367 Page 379

the discharge of the order for specific performance it must not consider matters prior to that order.

The relevant cases are Ferguson v. Wilson (1866) L.R. 2 Ch.App. 77, 91; Betts v. Gallais (1870) L.R. 10 Eq. 392; Tamplin v. James (1880) 15 Ch.D. 215; Hipgrave v. Case (1885) 28 Ch.D. 356, 360-361, 362 and, Lavery v. Pursell (1888) 39 Ch.D. 508, 519.

The jurisdiction to award damages under Lord Cairns’ Act can be exercised if at the time there was power to make an order for specific performance. Here the appropriate time was when the vendors applied to have the order for specific performance discharged.

The question arises how the damages should be assessed. Till 1974 there is no authority to suggest that damages under Lord Cairns’ Act should be assessed otherwise than in the same manner as common law damages. Its wording does not suggest that there should be a new type of damages. It is a procedural Act creating no new jurisdiction to award damages on a different basis. It would be wrong to read into the words more than a procedural provision. When the old Court of Chancery exercised jurisdiction it did not as a general rule give damages.

From the passing of the Act in 1958 till Wroth v. Tyler [1974] Ch. 30 there was no case in which damages were assessed under it otherwise than on a common law basis. For the practice of the Court of Chancery, see Newcomb v. Bonham (1681) 2 Cas. in Ch. 58; Denton v. Stewart (1786) 1 Cox Eq.Cas. 258; Greenaway v. Adams (1806) 12 Ves. 395; Todd v. Gee (1810) 17 Ves. 273 and Elmore v. Pirrie (1887) 57 L.T. 333, 335.

In Wroth v. Tyler [1974] Ch. 30, 56-57, 59-60 it was held that damages under Lord Cairns’ Act might be awarded when there was no claim in law at all and that their quantum was not limited by the rules at law; reliance was there placed on Fritz v. Hobson (1880) 14 Ch.D. 542; Chapman, Morsons & Co. v. Auckland Union Guardians (1889) 23 Q.B.D. 294 and Dreyfus v. Peruvian Guano Co. (1889) 43 Ch.D. 316. But the court does not have jurisdiction to direct that damages under Lord Cairns’ Act should be assessed on a basis different from that on which they could be assessed at common law and in so far as Wroth v. Tyler [1974] Ch. 30 is authority to the contrary it is wrong and should be overruled. In that case the judge did not have jurisdiction to award damages in the way he did. It was not open to him to assert a jurisdiction which he did not have because it had not been conferred on him. He did not do bad justice but he made bad law. The so-called “Lord Cairns’ Act damages” are no different from common law damages. They are not sui generis, a species on their own. In the case of an action for breach of contract the plaintiff recovers in respect of the damage he has sustained. An injunction is dealing with the future. In Wroth v. Tyler[1974] Ch. 30 the judge had the material to assess the damages at common law but he thought he had jurisdiction to award another style of damages allowing something extra but the Act was never intended to confer that.

Grant v. Dawkins [1973] 1 W.L.R. 1406, 1409-1411 followed the previous case and goes no further. Goff J. put a date which was arbitrary and had nothing to do with the contractual relationship.

Horsler v. Zorro [1975] Ch. 302, 307-310, 312-313 underlines the difficulty of treating Lord Cairns’ Act as establishing a separate head of[1980] A.C. 367 Page 380

performance one cannot get damages because one has made one’s election. The use of the word “rescission” has caused confusion.

Tito v. Waddell (No. 2) [1977] Ch. 106, 334-335; Radford v. De Froberville [1977] 1 W.L.R. 1262, 1285 and Malhotra v. Choudhury [1980] Ch. 52, 79A-D and Rock Portland Cement Co. Ltd. v. Wilson (1882) 52 L.J.Ch. 214, 216.

When the date for the performance of a contract arises the plaintiff has a claim for damages if he treats the unperformed contract as at an end; he must make up his mind to elect to claim damages within a reasonable time, but when he has done so he must mitigate them.

In summary: (1) once a party has elected to affirm a contract he has made his final election; (2) nothing in Lord Cairns’ Act allows him to resile from his election; (3) the court must exercise its discretion and in deciding whether or not to exercise it in the vendor’s favour must consider whether, after a repudiatory breach he has failed to do anything to enforce the contract.

The court cannot make an order the effect of which would be to put the parties in a position essentially different from that in which they were when the matter first came before the court. The parties cannot be put back in the same position as when the order which it is sought to discharge was made. If the court decides that damages are to be awarded at all, the ordinary common law principles apply and damages are assessed as at the date of the breach.

As to the vendor’s claim that they are entitled to resile from their election and claim damages, by a second election, for the repudiatory breach, the problem arises from the fact that from January 1974 they indicated that they would affirm the contract. In May they took out a summons claiming specific performance and in June they took judgment. That was an unequivocal indication of their final decision to affirm the contract. Thereafter for over two years they consistently took steps which did not contradict their affirmation of the contract, including their notice of November 1976 when they sought an order for the payment of the balance of the purchase price and an inquiry as to damages. Their alternative claim for a declaration that they were entitled to treat the contract as repudiated first raised the point of their right to resile from the contract. If their affirmation of the contract during all those years is to be ignored, what happens to the doctrine of mitigation of damages? While they were affirming the contract the vendors were under a duty to preserve the property for the purchaser and in allowing the property to be sold they were themselves in breach. In the summer of 1975 the mortgagees sold the land piecemeal for less than it would have fetched if it had been sold all together. It was the vendors’ lack of diligence which was responsible for the sale. They should not be entitled to damages.

P. J. Millett Q.C. and Dirik Jackson for the respondents. Two questions arise: (1) whether in the events which have happened the vendors are entitled to damages for breach of contract, and (2) if so, what is the proper measure of damages.[1980] A.C. 367 Page 381

The first question raises various questions long ago settled and but for certain lines of authority in the Chancery Division the answer would be clearly in the affirmative. These authorities are a legacy from the time before the law of contract was fully developed. In this field Chancery has remained loyal to rules which are now out of line with the modern law of contract. There are two lines of authority, which may or may not be distinct. One line stemming from Henty v. Schröder, 12 Ch.D. 666, apparently lays down the rule that after specific performance has been ordered there can be no award of damages. The basis of the rule is not clear. The other line of authority culminating in Horsler v. Zorro [1975] Ch. 302 proceeds on the basis that one of the remedies for breach is setting aside the contract ab initio. But there is no such remedy and it may be that this fallacy is at the root of the Henty line of cases.

It is submitted: (1) When a vendor of land obtains a decree of specific performance which, by reason of the purchaser’s continued default proves abortive, the vendor is entitled to apply to the court for an order discharging the decree, treating the contract as discharged, forfeiting the deposit and awarding damages at common law. (2) He is entitled as an alternative to damages for breach at common law to damages under Lord Cairns’ Act. (3) Whatever the jurisdiction under which the damages are awarded the measure of them is the same. It is the difference between the contract price and the value of the land, not at the contractual date fixed for completion, but at the later date when the contract was finally lost, i.e., the date of the order discharging the decree of specific performance or, if earlier, as here, the date on which the decree was rendered abortive by the purchaser’s default, the date on which the mortgagees exercised their power of sale. (4) If, contrary to the vendors’ contentions, the measure of damages at common law is restricted by reference to the contractual date for completion, then it is not so restricted under Lord Cairns’ Act and the vendors are entitled to opt for the more favourable measure.

The breach here consists of the total failure on the purchaser’s part to perform her contractual obligations, i.e., pay the purchase money. There is only one breach of contract, the failure to pay it on the contractual date fixed for completion, December 6, 1973. There is no fresh or daily breach, only a continuing state of breach which has never been over-ridden by the decree for specific performance and continued unremedied till the date of the sale by the mortgagees. What Sir John Pennycuick said in Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319, 331 is correct.

The foundation of the vendors’ case is that the contract was lost by the purchaser’s default. It was never frustrated; one or other party must be in breach and liable to damages accordingly and it was the purchaser. Buckley L.J. correctly assessed the facts in the court below [1978] Ch. 176, 192-193, as did Goff L.J. at p. 199. On those facts it was the purchaser’s failure to complete that caused the mortgagees to exercise their power of sale. The fundamental fact is that the purchase price exceeded the sums needed to redeem the mortgages. Right up to the time the contract was lost the vendors were entitled to redeem and to use the money received from the purchaser for that purpose. Through not getting it the vendors lost the property to the mortgagees. The[1980] A.C. 367 Page 382

purchaser failed to comply with the notice to complete. On the application to the master for an order for specific performance her solicitors were present. The evidence contradicts the suggestion that before the mortgagees had exercised their powers of sale the purchaser had raised the money and was ready to pay it.

The consequences of this breach were very severe for the vendors. The land fetched too little to clear the mortgages and the respondents are insolvent so that their only resort lies in their rights against the purchaser. It does not lie with the purchaser to complain of the vendors’ delay in pressing their claim.

The contract was lost by reason of the purchaser’s breach of contract and there is no reason why she should not be liable for damages at common law. If the vendors had not obtained an order for specific performance they could clearly have treated her actions as repudiatory and obtained damages for total non-performance. The purchaser relies on the alleged doctrine of irrevocable election, but there is no such doctrine. All depends on the circumstances of the case and the consequences of what is done. An election to accept repudiation is irrevocable. Thereafter the innocent party cannot seek specific performance, because the wrongdoer has been discharged from all further obligation to perform the contract. But the converse is not correct. A party seeking specific performance has only made up his mind for the time being to ask for it in the hope that the wrongdoer will perform his obligations. A decision to kill the contract is permanent and irrevocable; a decision to keep it alive is temporary and revocable.

Suppose a seller of goods is in default, e.g., because they are not up to sample, then if the buyer rejects them he is accepting the repudiation and can sue for damages for total non-performance, but if he accepts substituted performance he cannot sue for non-performance, though he can sue on the basis of partial performance. In the case of late delivery, a form of substituted performance, the buyer is entitled to reject the goods, treating the contract as at an end and buying replacement goods elsewhere. If he accepts late delivery, he will have a right to damages on the basis of partial performance but not of non-performance. The seller has no right to demand the acceptance of substituted performance. If a buyer waits for a seller who does not turn up at the agreed time he does not lose his right to call the contract off at any time.

The same principles apply to the sale of land. There are only two differences: (i) time not originally to be of the essence, (ii) the remedy of specific performance is available. If the purchaser fails to complete on the day fixed by the contract he is in breach of contract, but the vendor is not entitled to treat the breach as repudiatory and the purchaser has not lost his right to purchase, so that he may turn up with the money and insist on completion. But, once time has been made of the essence, the vendor is entitled to treat the breach as repudiatory. Contrary to the appellant’s contentions the purchaser’s obligation under the contract never changes. The obligation to complete on the original date always remains.

Where a purchaser fails to complete after the expiry of a notice making time of the essence, the vendor may elect between two alternative[1980] A.C. 367 Page 383

of the contract and claim damages at common law, both parties being thereupon discharged from further performance of the contract; this course is often described as “rescission” of the contract, but it is not the same type of rescission as that which occurs when the contract is rescinded ab initio on the ground of some inherent defect: Heyman v. Darwins Ltd. [1942] A.C. 356, 361. (ii) Alternatively, he may refuse to treat the contract as discharged and claim specific performance with damages in addition for any loss to him arising from the delay.

Despite the existence of authority to the contrary, there is no third alternative consisting of “rescinding” the contract ab initio. Rescission ab initio is not a remedy for breach.

If the vendor elects to accept the repudiation, his decision to do so is irrevocable. This follows, not from any particular significance to be attached to the word “election,” but from the consequences of the choice he makes. The vendor cannot, after electing to accept the repudiation, claim specific performance of obligations which ex hypothesi have been discharged.

If the vendor elects for specific performance, he does not waive the breach. Indeed he relies on it and may claim damages for it. The original breach continues to subsist until there is performance or the contract is discharged by later acceptance of the repudiation or by order of the court.

In an action for the purchaser’s breach of contract the vendor may seek both alternative remedies. It may be at the trial he must elect between the two, but there is authority for saying that he can ask the court to grant specific performance, but if, for some reason, it declines to do so, to award damages at common law. Be that as it may, a judgment for damages on the footing that the contract is discharged will prevent the vendor from claiming performance if the contract thereafter for the reason already stated and also because the contract has merged in the judgment for damages.

If the vendor takes a decree for specific performance, the contract is not merged in the judgment and the original breach of contract continues to subsist so long as the purchase price remains unpaid. All that happens is that the court reinforces the provisions of the contract with the enforcement powers which the vendor can bring into play if the purchaser fails to complete the contract.

If the decree is not obeyed the vendor again has a choice: (i) He may apply to the court to enforce the decree, in particular by the enforcement of the vendor’s lien on the land. (ii) Alternatively, he may apply to the court to dissolve the decree and “rescind” the contract. However, if the Court of Appeal’s decision in Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319 is correct, the vendor cannot, if at this stage he elects for rescission, obtain damages at common law. That case was wrongly decided.

In the authorities which deny the vendors’ right to damages at common law, it is possible to discover three bases for this denial: (1) that a vendor cannot have rescission and damages at the same time, the Henty v. Schröder, 12 Ch.D. 666, basis; (2) that a vendor has made an irrevocable election the Swycher [1976] Ch. 319 basis; (3) that a vendor is released from a decree of specific performance only as a matter of discretion and that in exercise of that discretion the court will not permit him to have[1980] A.C. 367 Page 384

below. None of the remedies which support the rule denying the vendors a remedy in damages at common law is binding on the House of Lords and they are all unsound.

Henty v. Schröder, 12 Ch.D. 666, 667, has for a century represented an anomaly in the English law of contract to which the House of Lords should deliver the coup de grace. In that case it was held, without reasons given, that the vendor who was abandoning an order for specific performance with which the purchaser had not complied “could not at the same time obtain an order to have the agreement rescinded and claim damages against the defendant for breach of the agreement.” At the time of this statement there were authorities in complete conflict with it: Sweet v. Meredith, 4 Giff. 207 and Watson v. Cox, L.R. 15 Eq. 219. It is possible that Henty v. Schröder, 12 Ch.D. 666, was really a procedural decision only; it was delivered at a time when to get damages in Chancery a separate bill had to be filed: see Hythe Corporation v. East (1866) L.R. 1 Eq. 620. The form of judgment in that case is set out in Seton’s Judgments and Orders, vol. 3, p. 2219. Or it is possible that Sir George Jessel M.R. was confusing the type of rescission which the vendor was seeking with rescission ab initio where there is an inherent defect in the contract and where damages are not available because the contract is treated as wholly avoided. Alternatively, he may have had in mind the theory, which was once current but is now exploded, that rescission ab initio is a remedy for breach of contract. Be that as it may, that decision was followed in a number of cases and was carried to its logical conclusion in Jackson v. De Kadich[1904] W.N. 168 in a refusal to declare that a vendor who had abandoned an order for specific performance was entitled to forfeit the deposit which the purchaser had paid. In Hall v. Burnell[1911] 2 Ch. 551, Eve J. refused to follow that case. This is inconsistent with the contract having been rescinded ab initio, for the right to forfeit the deposit arises under the contract. In Harold Wood Brick Co. Ltd. v. Ferris [1935] 1 K.B. 613, Swift J. treated Henty v. Schröder, 12 Ch.D. 666, as an authority, not on the law of contract, but on the practice of the Chancery Division at the time it was decided. Nonetheless it was treated as good law in Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302, although the rule is inconsistently applied, for while denying the claim to damages, the courts have awarded conveyancing costs. Yet these are damages: In re Hargreaves & Thompson’s Contract (1886) 32 Ch.D. 454. The rule has been rejected in Australia: McKenna v. Richey [1950] V.L.R. 360 and Bosaid v. Andry [1963] V.R. 465.

However Henty v. Schröder, 12 Ch.D. 666, is interpreted, it cannot stand as a part of the modern law of contract. If, as Megarry J. interpreted it in Horsler v. Zorro [1975] Ch. 302, it supports the theory that rescission ab initio is a remedy for breach of contract, then this is a remedy which finds no support except in cases following Henty v. Schröder and no place at all in any of the leading textbooks on the law of contract. Since the Court of Appeal’s decision in the present case Goff L.J. has rejected the[1980] A.C. 367 Page 385

theory in Buckland v. Farmar & Moody [1979] 1 W.L.R. 221. It was also explicitly rejected in Australia by Dixon J. in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457. If, on the other hand, Henry v. Schröder, 12 Ch.D. 666, purports to be a decision that in no circumstances can a litigant have both rescission and damages it conflicts with innumerable dicta at every level of authority, e.g., Heyman v. Darwins Ltd. [1942] A.C. 356, 361, 373, 378-379, 398, 399; Fibrosa Spolka Akcyjna v. Fairbairn Lawson Coombe Barbour Ltd. [1943] A.C. 32, 52, 53, 65, 67 and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 349-350. In fact Henty v. Schröder, 12 Ch.D. 666, has only survived as an authority in the law of contracts for the sale of land, but there is no reason or authority for treating such contracts on a different basis in this respect from any other contract. Mayson v. Clouet [1924] A.C. 980 is authority to the contrary and Dixon J.’s classic statement in McDonald’s case, 48 C.L.R. 457, 476-477, was made in a case concerning a contract to sell land. In McKenna v. Richey [1950] V.L.R. 360, O’Bryan J. awarded the vendor damages at common law in precisely the situation which existed in Henty v. Schröder, 12 Ch.D. 666, and which exists in the present case. Henty v. Schröder is thus deprived of any legal or logical basis and cannot stand as the foundation of the practice which the Court of Appeal has sanctioned in this case.

The fallacy that rescission ab initio is available as a remedy for breach of contract can be traced back to Dutch v. Warren (1720) 1 Stra. 406 (see the editor’s footnote), explained in Moses v. Macferlan (1760) 2 Burr. 1005, 1010-1011, 1013.

In the early 19th century the courts were in a dilemma. If the buyer did not complete the seller could sell the property elsewhere and then sue for damages. But how could the seller sell elsewhere if the contract was still subsisting? On the other hand, if it was said that the contract no longer subsisted, how could there be damages for breach of the contract? The courts went through many contortions to solve the problem. It was finally solved by the doctrine of accepted repudiation: see Benjamin on Sale, 8th ed. (1950), p. 938 and Boston Deep Sea Fishing and Ice Co. v. Ansell, 39 Ch.D. 339, 365. The injured party can accept the repudiation as going to the root of the contract and, while being himself discharged from further performance, can sue for damages. The heresy that he cannot have damages ought to have been killed by Mayson v. Clouet[1924] A.C. 980, 985-986. Heyman v. Darwins Ltd. [1942] A.C. 356, 361, 373, 378-379, 398-399 (which sets out the modern view of discharge by repudiation); the Fibrosa Spolka case [1943] A.C. 32, 52, 65, 67, 73-74; Holland v. Wiltshire (1954) 90 C.L.R. 409, 416 (Dixon C.J.); the Lep Air Services case [1973] A.C. 331, 349- 350; Lowe v. Hope [1970] Ch. 94. It was nailed in McDonald’s case, 48 C.L.R. 457, 469-470, 476-477. The law is not correctly stated in Williams on The Contract of Sale of Land (1930), pp. 119, 121 and Williams, Vendor and Purchaser, 4th ed., pp. 1003-1004, 1010, 1025, 1026, both cited in Horsler v. Zorro [1975] Ch. 302, 309, 310, 314 and both based ultimately on Moses v. Macferlan, 2 Burr. 1010.

Horsler v. Zorro [1975] Ch. 302, 307, 309, 313-314, should be overruled The criticisms of that decision in the article by Mr. Michael[1980] A.C. 367 Page 386

Albery Q.C., “Mr. Cyprian Williams’ Great Heresy” (1975) 91 L.Q.R. 337 are fully justified. The “heresy” has been rejected by the Court of Appeal in Buckland’s case [1979] 1 W.L.R. 221, 232F, 238. The House of Lords should give it the coup de grace.

The doctrine of irrevocable election begs the question, since one who elects for specific performance does not elect for an empty decree but for the fullness of the remedy. If the courts allow damages to be substituted for an abortive decree, as the respondents contend, then this is what they elected for. In any case, the doctrine is inapplicable, for it is conceded that a claimant can elect; he can elect to have the decree dissolved and the contract “rescinded.” Why can he not have the damages to which he is entitled following this election?

The passage in Williams on Vendor and Purchaser, 4th ed., p. 1025 on which the appellants rely was an invention of the author unsupported by the citations in the footnote. Dominion Coal Co. Ltd. v. Dominion Iron and Steel Co. Ltd. [1909] A.C. 293 has nothing to do with the proposition in the text: see pp. 310-311. Nor have the other cases cited by Williams. See also Stickney v. Keeble[1915] A.C. 386, 415-416. The most important case cited is Scarf v. Jardine (1882) 7 App.Cas. 345; but that was a case of election between inconsistent rights, not remedies. There is no doctrine of irrevocable election between inconsistent remedies: United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1.

As to the question whether damages are available under Lord Cairns’ Act, it is common ground that the mere fact that damages are available at common law does not preclude them from being available under the Act which was intended to prevent suitors being bandied about from one court to another. The Act may have started by being procedural only, but in time it developed a life of its own. It was early recognised that it gave jurisdiction to the Chancery courts to award damages which the common law courts could not, e.g., damages for breach of a restrictive covenant when the defendant was not the original covenantor: see Eastwood v. Lever (1863) 4 De G.J. & S. 114, 128 and Leeds Industrial Co-operative Society Ltd. v. Slack [1924] A.C. 851, 856. The appellant relied on Rock Portland Cement Co. Ltd. v. Wilson, 52 L.J.Ch. 214, but that was only a decision that the rule in Bain v. Fothergill (1874) L.R. 7 H.L. 158 applied equally to damages under Lord Cairns’ Act and at common law. Some of the reasoning in that case cannot stand. Similarly some of the obiter dicta in Elmore v. Pirrie, 57 L.T. 333, cannot stand. It is enough to found jurisdiction to award damages if at the relevant date there was jurisdiction to order specific performance or grant an injunction. The appellant’s argument confuses jurisdiction with discretion. Hindley v. Emery (1865) L.R. 1 Eq. 52 was a case of damages being granted in substitution for specific performance. It is some authority for the proposition that an injunction and specific performance should be treated in the same way. Here the court should in its discretion grant damages: see McKenna v. Richey [1950] V.L.R. 360, 372-373. The respondents challenge the correctness of the approach in Horsler v. Zorro [1975] Ch. 302, 307. Lord Cairns’ Act does not require a plaintiff to claim specific performance in order to give the court jurisdiction to entertain a claim for damages. He must plead enough to found[1980] A.C. 367 Page 387

the jurisdiction. Here the jurisdiction to award damages under the Act subsists.

As to the measure of damages, it is the same both at common law and under Lord Cairns’ Act. The object of damages is to put the innocent party in the position he would have been in if the contract had been performed: Robinson v. Harman (1848) 1 Exch. 850, 855. A plaintiff’s duty to mitigate damages only arises when he ceases to attempt to enforce the contract. The breach is tied to the contractual date of completion but in a proper case assessment would be related to the later date on which the sale was lost. In cases where the remedy of specific performance are not available so that the damages were common law damages the date would be the latest date on which the plaintiff, acting reasonably, is waiting for the defendant to perform his contract voluntarily. Where the remedy of specific performance is available and is properly sought, there is no basis for treating the plaintiff as acting unreasonably in refusing to accept the breach as a repudiation. Accordingly, there is no reason to fix an earlier date than the date on which he abandons the claim for specific performance. Normally that would be the date of the hearing but here it is the date after which specific performance was no longer possible.

As to the measure of damages on a breach of contract, see McGregor on Damages, 13th ed. (1972), para. 631, p. 446; Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275, 281; L.R. 3 Q.B. 272. It is always justifiable to wait at least as long as specific performance is available. Ogle v. Earl Vanewas applied in Hickman v. Haynes (1875) L.R. 10 C.P. 598. See also Tredegar Iron and Coal Co. Ltd. v. Hawthorn Bros. & Co. (1902) 18 T.L.R. 716 and Radford’s case [1977] 1 W.L.R. 1262, 1285-1286. The plaintiff’s right being subject to his duty to mitigate damages, how long after the breach is it reasonable for him to wait for voluntary performance? The right approach appears from Lazenby Garages Ltd. v. Wright [1976] 1 W.L.R. 459, 462.

At common law if there is a rising market and the plaintiff does not call off the contract until the market has risen he cannot claim damages as at the earlier time. The converse is true in the case of a falling market.

It is the respondents’ primary contention that the measure of damages is the same under the Act as at common law and that it is not limited to the date of breach. If for any reason common law damages are so limited, damages under the Act are not so limited. The words of Lord Cairns’ Act are at large. They enabled the Court of Chancery to give damages where they could not be given at common law. The court can take into account matters which have arisen since the writ. There is nothing new in equity giving a better remedy than the common law in this or in other matters.

Jackson following. The argument for the appellant assumes that time was not of the essence. But the respondents could have started an action for specific performance without serving a notice to complete. Without any such notice they could go straight ahead to obtain an order. If the order proves abortive they are not debarred from obtaining damages: see Griffiths v. Vezey [1906] 1 Ch. 796 and Public Trustee v. Pearlberg [1940] 2 K.B. 1. The appellant’s inaction was an added factor in the sale going off.[1980] A.C. 367 Page 388

As to the jurisdiction under Lord Cairns’ Act, it was at first assumed to be procedural but it has gone beyond that: compare Lord Sumner’s dissenting opinion in the Leeds Industrial case [1924] A.C. 851, 865 et seq. with the views of the majority.

In some circumstances in the case of a breach of contract the innocent party is not bound to act so as to mitigate damages: see the Tredegar Iron case, 18 T.L.R. 716, and White and Carter (Councils) Ltd. v. McGregor [1962] A.C. 413.

On the question whether a party can get damages under Lord Cairns’ Act after he has ceased to pursue the remedy of specific performance, the House of Lords would render a service to the law if it held that there was jurisdiction under the Act to grant damages even though the remedy of specific performance was not being pursued and had not been claimed in the writ.

If the House of Lords takes November 26, 1974, when the order for specific performance was drawn up, as the last reasonable date when the respondents could have been pressing for specific performance, the date by reference to which damages are to be assessed should be selected on the basis that they were given a reasonable opportunity to achieve a sale of the property. Not less than three months after November would have been a reasonable time, a period not unusual for putting land on the market and completion of the sale.

Hames Q.C. in reply. The main issue in this case is whether the election to affirm this contract was the exercise of a right (as the appellants say) or of a remedy (as the respondents say).

In seeking an order for specific performance the respondents unequivocally affirmed the contract. That was irrevocable. If such an election is not binding a vendor can resile from his election at any time. Suppose a vendor gets an order for specific performance thereby affirming the contract and the purchaser comes forward with the money due, offering to pay it, but meanwhile property values have gone up, then, according to the respondents’ argument, the vendor could change his mind. It would be an extraordinary situation if he could go back to his original rights which arose on the purchaser’s breach of contract and which he waived. Nothing supports so wide a proposition. The vendor could then choose the market price he preferred and the purchaser would be subject to a punitive situation.

The argument is false. An election between incompatible rights is final, once it is made. The finality of the election is not dependent on its consequences. To hold that would be a complete departure from principle.

By issuing his writ the vendor has indicated that he is prepared to accept a date fixed by the court, so that performances will be at such time and in such manner as the court determines. He is accepting a substituted date and cannot resile from it. He loses the right to completion on a date chosen unilaterally by himself.

As to the passage in Williams on Vendor and Purchaser, 4th ed., p. 1025, there is some support for the proposition in the text in Phelps v. Prothero, (1855) 7 De G.M. & G. 722, 734, cited in the footnote and also in Carrick v. Young. 4 Madd. 437.[1980] A.C. 367 Page 389

When the appellant failed to complete on December 6, 1973, there was not a continuing breach so that she was under a continuing obligation to complete.

A seller or buyer accepting substituted performance is making an irrevocable election and the same is true in the case of an order for specific performance on a sale of land because relying on an order of the court is accepting substituted performance.

On the contractual date for completion there was imposed on the purchaser an obligation to complete. On a breach the vendor’s only right was to claim damages. He had no right to demand completion on a later date. The claim in damages continued to run even though the breach was complete. After a while it would have been statute-barred. There is a similarity between the ordinary law of sale of goods and sale of land. In each case there is an obligation to complete the contract but in the case of land there is machinery for fixing another date and under the equitable remedy of specific performance the court can fix a substituted date. In the present case to obtain the fixing of another date the respondents could either rely on condition 19 of the conditions of sale or apply to the court or fix one by agreement. The respondents would have had a claim in damages for delay in completion, though the claim in damages might be discharged, say, if the purchaser gave a cheque for the amount due, offering to complete later. If the purchaser failed to complete on the new date there would be a new claim for damages. In Luck v. White, 26 P. & C.R. 89, 95-96, there is a clear indication that there is not a continuing breach and that another date for completion must be fixed either by the parties or by the court.

There are two kinds of damages (a) the ordinary damages for breach of contract and (b) damages for loss of the bargain. Nothing ends the claim for damages for delay. What is lost when a contract is affirmed is the right to damages for loss of the bargain. It is not disputed that the respondents might be entitled to the former but, though they claimed them in their notice of motion, they never pressed the claim. The right to damages for loss of the bargain went when the respondents affirmed the contract, though it might be revived if there was a further repudiatory breach.

It is for the party who seeks to have an order for specific performance discharged to satisfy the court that it should be discharged. Here it was for the respondents to show why the court should exercise its discretion as they asked.

The effect of discharge of the order for specific performance is not to discharge the election. Theoretically there are three possible effects of discharging the order: (a) the election itself might be discharged, as the respondents contend; (b) a new repudiatory breach might be constituted, so that the contract might be treated as at an end; (c) it might (as the appellant contends) relieve both parties of the need to comply with the order for specific performance, without discharging the consequences of making the order.

The first possibility is eliminated because it ignores the finality of an election. Taking the order is evidence of an election to affirm the contract, though there may be other evidence of what happened before and after at[1980] A.C. 367 Page 390

which the court would look. If the contract is affirmed all that is given up is the right to damages for the repudiatory breach. That is final. By affirming the contract the vendors are representing that they can preserve the land for the purchaser. By discharging the order for specific performance one does not unmake the effect of the election by a retrospective legal fiction. The discharge of the order for specific performance is an escape route to allow the vendor to sell the land elsewhere.

It is accepted that in many of the English authorities the word “rescission” is used and so it is hard to be sure of their exact scope. In some cases the word “damages” is used ambiguously. In some cases, though the reasoning may be at fault, the decision itself was right. Reliance is placed on Scarf v. Jardine, 7 App.Cas. 345, 360-361 and Clough’s case, L.R. 7 Ex 26, 34-35. The one case against the appellant is McKenna v. Richey [1950] V.L.R. 360, 361-362, 365, 369-370, 372, 376. In that case the plaintiff never had an unconditional order for specific performance; it may never have been effective. The election itself was not unequivocal. Bosaid v. Andry [1963] V.R. 465 merely followed that case, going no further. Both of those decisions are challenged.

Lord Cairns’ Act did not create a new type of damages apart from common law damages. It helps to fill a gap where common law damages may not have been available, for example, where a tort had been threatened but not committed. On the question whether damages could be awarded under this Act at a time when there was no power to order specific performance it is accepted that the cases on jurisdiction are against the appellant, indicating that the relevant time is the date of the writ. But the time for the exercise of the discretion is when it is sought. On this point there is not much difference between the appellant and the respondents.

If the respondents were so dependent on receiving the money they should have made time of the essence. Their delays are incompatible with the urgency alleged. There was nothing to alert the appellant as to the urgency. It is wrong to blame her for the action of the mortgagees. The respondents were trustees to preserve the property for her.

Although the date of the breach is the moment of time from which the damage flows the vendor may make up his mind within a reasonable time whether or not to go on with the contract, but in a case of urgency the vendor must make a speedy election, speedier than in other cases.

Their Lordships took time for consideration.

March 8.LORD WILBERFORCE. My Lords, this appeal arises in a vendors’ action for specific performance of a contract for the sale of land, the appellant being the purchaser and the vendors respondents. The factual situation is commonplace, indeed routine. An owner of land contracts to sell it to a purchaser; the purchaser fails to complete the contract; the vendor goes to the court and obtains an order that the contract be specifically performed; the purchaser still does not complete; the vendor goes back to the court and asks for the order for specific performance to be dissolved, for the contract to be terminated or “rescinded,” and for an order for damages. One would think that[1980] A.C. 367 Page 391

the law as to so typical a set of facts would be both simple and clear. It is no credit to our law that it is neither. Learned judges in the Chancery Division and in the Court of Appeal have had great difficulty in formulating a rule and have been obliged to reach differing conclusions. That this is so is due partly to the mystification which has been allowed to characterise contracts for the sale of land. as contrasted with other contracts, partly to an accumulated debris of decisions and text book pronouncements which has brought semantic confusion and misunderstandings into an area capable of being governed by principle. I hope that this may be an opportunity for a little simplification.

I must state the facts in some detail because the sequence of events may be important. I repeat however that such additional elements as appear in the relevant history do not take the present case away from the normal. Many sellers of one property commit themselves concurrently to buying another: indeed to do so is often the main reason for the sale. Many sellers of property have incumbrances on that property. The law should be able to accommodate such matters without indigestion.

The contract for sale was dated November 1, 1973. The property sold was called Sheepcote Grange, Woodburn Common. Bucks.; it consisted of the grange itself and some grazing land. On the grange there was a first legal charge to a building society for £15,600 and two other charges. On the grazing land there was a first legal charge to a finance company for £6,000 and a second legal charge to a bank. The purchase price under the contract was £117,000 and so was ample to pay off the charges and to leave the vendors with money to buy another property. In fact on November 1, 1973, they contracted to buy one for £34,000, and raised the purchase money by loan from a bank. If the first contract had been completed according to its terms, no difficulty would have arisen: the bank loan would have been discharged from the purchase price.

The contract was made by reference to the Law Society’s General Conditions of Sale (1973) and provided for completion on December 6, 1973. A deposit of 10 per cent. was to be paid but the purchaser only paid £3,000. Before December 6, 1973, the purchaser had accepted the vendors’ title (this of course disclosed the existence of the mortgages) and a form of conveyance was agreed. However the purchaser did not complete on that date. On December 21, 1973, the vendors’ solicitors served a notice, under condition 19, making time of the essence of the contract and fixing January 21, 1974, as the final date by which completion was to take place. The purchaser failed to complete on that date. On March 8, 1974, the vendors issued a writ claiming specific performance and damages in lieu of or in addition thereto and alternatively a declaration that the vendors were no longer bound to perform the contract and further relief. On May 20, 1974, the vendors issued a summons under R.S.C., Ord. 86 for summary judgment for specific performance, and the order sought was made in the usual form on June 27, 1974. It was not however drawn up and entered until November 26, 1974.

Meanwhile action was taken by the vendors’ mortgagees. The building society obtained an order for possession of the grange on August 22, 1974, they sold it on June 20, 1975, and completion took place on July 18, 1975,[1980] A.C. 367 Page 392

The finance company obtained an order for possession of the grazing land on March 7, 1975; they sold it on April 3, 1975, and completion took place on July 11, 1975. Thus by April 3, 1975, specific performance of the contract for sale had become impossible. The vendors took no action upon the order for specific performance until November 5, 1976, when they issued a notice of motion seeking (a) an order that the purchaser should pay the balance of the purchase price and an inquiry as to damages or (b) alternatively a declaration that they were entitled to treat the contract as repudiated by the purchaser and to forfeit the deposit and an inquiry as to damages.

On February 25, 1977, Megarry V.-C. dismissed the motion. He rejected the first claim on the ground that, as specific performance was no longer possible, it would be unjust to order payment of the full purchase price. The second claim was not pressed, on the ground that it was precluded by authority: Capital and Suburban Properties Ltd. v. Swycher [1976] Ch. 319.

The vendors appealed to the Court of Appeal who again rejected each alternative: they followed the previous decision in Swycher’s case. However they held that the vendors could recover damages under the Chancery Amendment Act 1858 (Lord Cairns’ Act), which enables the court to award damages in addition to or in substitution for specific performance. They accordingly made an order discharging the order for specific performance and an order for an inquiry as to damages. They fixed the date on which damages should be assessed as November 26, 1974, being the date of entry of the order for specific performance. The purchaser is now appealing against this order.

In this situation it is possible to state at least some uncontroversial propositions of law.

First, in a contract for the sale of land, after time has been made, or has become, of the essence of the contract, if the purchaser fails to complete, the vendor can either treat the purchaser as having repudiated the contract, accept the repudiation, and proceed to claim damages for breach of the contract, both parties being discharged from further performance of the contract; or he may seek from the court an order for specific performance with damages for any loss arising from delay in performance. (Similar remedies are of course available to purchasers against vendors.) This is simply the ordinary law of contract applied to contracts capable of specific performance.

Secondly, the vendor may proceed by action for the above remedies (viz. specific performance or damages) in the alternative. At the trial he will however have to elect which remedy to pursue.

Thirdly, if the vendor treats the purchaser as having repudiated the contract and accepts the repudiation, he cannot thereafter seek specific performance. This follows from the fact that, the purchaser having repudiated the contract and his repudiation having been accepted, both parties are discharged from further performance.

At this point it is important to dissipate a fertile source of confusion and to make clear that although the vendor is sometimes referred to in the above situation as “rescinding” the contract, this so-called “rescission” is[1980] A.C. 367 Page 393

quite different from rescission ab initio, such as may arise for example in cases of mistake, fraud or lack of consent. In those cases, the contract is treated in law as never having come into existence. (Cases of a contractual right to rescind may fall under this principle but are not relevant to the present discussion.) In the case of an accepted repudiatory breach the contract has come into existence but has been put an end to or discharged. Whatever contrary indications may be disinterred from old authorities, it is now quite clear, under the general law of contract, that acceptance of a repudiatory breach does not bring about “rescission ab initio.” I need only quote one passage to establish these propositions.

In Heyman v. Darwins Ltd. [1942] A.C. 356 Lord Porter said, at p. 399:

“To say that the contract is rescinded or has come to an end or has ceased to exist may in individual cases convey the truth with sufficient accuracy, but the fuller expression that the injured party is thereby absolved from future performance of his obligations under the contract is a more exact description of the position. Strictly speaking, to say that on acceptance of the renunciation of a contract the contract is rescinded is incorrect. In such a case the injured party may accept the renunciation as a breach going to the root of the whole of the consideration. By that acceptance he is discharged from further performance and may bring an action for damages, but the contract itself is not rescinded.”

See also Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch.D. 339, 365, per Bowen L.J.; Mayson v. Clouet [1924] A.C. 980, 985, per Lord Dunedin and Lep Air Services Ltd. v. Rolloswin Investments Ltd. [1973] A.C. 331, 345, per Lord Reid, 350, per Lord Diplock. I can see no reason, and no logical reason has ever been given, why any different result should follow as regards contracts for the sale of land, but a doctrine to this effect has infiltrated into that part of the law with unfortunate results. I shall return to this point when considering Henty v. Schröder (1879) 12 Ch.D. 666 and cases which have followed it down to Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302.

Fourthly, if an order for specific performance is sought and is made, the contract remains in effect and is not merged in the judgment for specific performance. This is clear law, best illustrated by the judgment of Sir Wilfrid Greene M.R. in Austins of East Ham Ltd. v. Macey [1941] Ch. 338, 341 in a passage which deals both with this point and with that next following. It repays quotation in full.

“The contract is still there. Until it is got rid of. it remains as a blot on the title, and the position of the vendor, where the purchaser has made default, is that he is entitled, not to annul the contract by the aid of the court, but to obtain the normal remedy of a party to a contract which the other party has repudiated. He cannot, in the circumstances, treat it as repudiated except by order of the court and the effect of obtaining such an order is that the contract, which until then existed, is brought to an end. The real position, in my judgment, is that so far from proceeding to the enforcement of an order for

[1980] A.C. 367 Page 394

specific performance, the vendor, in such circumstances is choosing a remedy which is alternative to the remedy of proceeding under the order for specific performance. He could attempt to enforce that order and could levy an execution which might prove completely fruitless. Instead of doing that, he elects to ask the court to put an end to the contract, and that is an alternative to an order for enforcing specific performance.”

Fifthly, if the order for specific performance is not complied with by the purchaser, the vendor may either apply to the court for enforcement of the order, or may apply to the court to dissolve the order and ask the court to put an end to the contract. This proposition is as stated in Austins of East Ham Ltd. v. Macey [1941] Ch. 338 (and see Singh (Sudagar) v. Nazeer [1979] Ch. 474, 480, per Megarry V.-C.) and is in my opinion undoubted law, both on principle and authority. It follows, indeed, automatically from the facts that the contract remains in force after the order for specific performance and that the purchaser has committed a breach of it of a repudiatory character which he has not remedied, or as Megarry V.-C. puts it [1979] Ch. 474, 480, 790, that he is refusing to complete.

These propositions being, as I think they are, uncontrovertible, there only remains the question whether, if the vendor takes the latter course, i.e., of applying to the court to put an end to the contract, he is entitled to recover damages for breach of the contract. On principle one may ask “Why ever not?” If, as is clear, the vendor is entitled, after, and notwithstanding that an order for specific performance has been made, if the purchaser still does not complete the contract, to ask the court to permit him to accept the purchaser’s repudiation and to declare the contract to be terminated, why, if the court accedes to this, should there not follow the ordinary consequences, undoubted under the general law of contract, that on such acceptance and termination the vendor may recover damages for breach of contract?

I now consider the arguments which are said to support the negative answer.

(1) The principal authority lies in the case of Henty v. Schröder, 12 Ch.D. 666, 667 in which Sir George Jessel M.R. is briefly reported as having laid down that a vendor “could not at the same time obtain an order to have the agreement rescinded and claim damages against the defendant for breach of the agreement.” The unsatisfactory nature of this statement has often been remarked upon. It is unsupported by reasons, and is only reported in oratio obliqua. It is in direct conflict with previous authorities – Sweet v. Meredith (1863) 4 Giff. 207; Watson v. Cox (1873) L.R. 15 Eq. 219 (more fully in 42 L.J.Ch. 279); yet no reason is given why these authorities are not followed, nor is it said that they are overruled. If it were not for the great authority of the Master of the Rolls, I can hardly believe that so fragile and insecure a foundation for the law would ever have survived. Explanations have been canvassed – that Sir George Jessel was confusing discharge of a contract by accepted repudiation with rescission ab initio, a desperate hypothesis; that (much more plausibly) the statement was procedural in character, the emphasis[1980] A.C. 367 Page 395

being on “at the same time”; there was indeed authority, at that time, that in order to obtain damages a separate bill had to be filed: see Hythe Corporation v. East (1866) L.R. 1 Eq. 620. But it is not profitable to pursue these: the authority, weak as it is, is there and has been followed: it is necessary to see what strength it has gained in the process.

At first instance, it has been followed usually uncritically. In Hutchings v. Humphreys (1885) 54 L.J.Ch. 650 it was followed by North J. but upon a misapprehension as to what was ordered in Watson v. Cox. In Jackson v. De Kadich [1904] W.N. 168 – if contrary to sound practice this report is citable at all – Farwell J. (logically enough, if Henty v. Schröder, 12 Ch.D. 666 was right) appears to have decided that a vendor who did not proceed with an order for specific performance could not forfeit the purchaser’s deposit, but in Hall v. Burnell [1911] 2 Ch. 551 Eve J. took a different view. In Harold Wood Brick Co. Ltd. v. Ferris [1935] 1 K.B. 613 (on appeal [1935] 2 K.B. 198) Swift J. treated Henty v. Schröder, 12 Ch.D. 666 as depending on Chancery procedure at the time (1879). In recent times it has been treated as good law in Barber v. Wolfe [1945] Ch. 187and Horsler v. Zorro [1975] Ch. 302 but in each of these cases the judgment is discoloured by the erroneous conception of rescission ab initio: see [1945] Ch. 187, 189; [1975] Ch. 302, 309, 311, as a remedy for breach of contract. Horsler v. Zorro was itself firmly doubted, for this reason, by Goff L.J. in Buckland v. Farmar & Moody [1979] 1 W.L.R. 221, 237, in a passage with which I respectfully agree. Finally, Henty v. Schröder was endorsed by the Court of Appeal in Capital and Suburban Properties Ltd. v. Swycher (“Swycher’s case”) [1976] Ch. 319, but on a new basis which I shall shortly consider, and in the present case.

Textbook authority in general supports the decision. Fry on Specific Performance, 6th ed. (1921) p. 548 mentions the proposition with lack of enthusiasm but the main pillars in this case are Mr. T. Cyprian Williams’ books on The Contract of Sale of Land (1930) and on Vendor and Purchaser, 4th ed. (1936). In the former work (p. 121) he firmly commits himself to the theory of rescission plus restitutio in integrum as remedies for breach of the contract. In the latter, a well-known book of reference on conveyancing matters, he equally firmly denies a right to damages. The learned author writes, at pp. 1025-1026 of vol. 2:

“And if he obtains an order for specific performance of the contract, that will be a bar to his recovering damages for the breach; for in equity the plaintiff suing on a breach of contract was required, as a rule, to elect which remedy he would pursue; and a man entitled to alternative remedies is barred, after judgment on the one, from asserting the other.”

See also p. 1004.

My Lords, this passage is almost a perfect illustration of the dangers, well perceived by our predecessors but tending to be neglected in modern times of placing reliance on textbook authority for an analysis of judicial decisions. It is on the face of it a jumble of unclear propositions not logically related to each other. It is “supported” by footnote references to cases (two of this House and one of the Privy Council) which are not[1980] A.C. 367 Page 396

explained or analysed. It would be tedious to go through them in detail, but I am satisfied that, with the exception of the reference to Henty v. Schröder, they fail to support the text: it is enough to mention that the decisions cited of this House are Scarf v. Jardine (1882) 7 App.Cas. 345, a case of choosing between two inconsistent rights (see United Australia Ltd. v. Barclays Bank Ltd. [1941] A.C. 1, 30, per Lord Atkin), and Morel Brothers & Co. Ltd. v. Earl of Westmorland [1904] A.C. 11, an instance of the rule that after suing an agent, and obtaining judgment, you cannot sue the principal. Neither of these cases in any way bears upon one such as the present.

The state of authority then, so far as English law is concerned, is that, starting from a judgment in which no reasons are given, and which may rest upon any one of several foundations, of which one is unsound and another obsolete, a wavering chain of precedent has been built up, relying upon that foundation, which is itself unsound. Systems based upon precedent unfortunately often develop in this way and it is sometimes the case that the resultant doctrine becomes too firmly cemented to be dislodged.

This is however the first time that this House has had to consider the right of an innocent party to a contract for the sale of land to damages on the contract being put an end to by accepted repudiation, and I think that we have the duty to take a fresh look. I should certainly be reluctant to invite your Lordships to endorse a line of authority so weak and unconvincing in principle. Fortunately there is support for a more attractive and logical approach from another bastion of the common law whose courts have adopted a more robust attitude. I quote first from a judgment of Dixon J. in McDonald v. Dennys Lascelles Ltd. (1933) 48 C.L.R. 457 which with typical clarity sets out the principle – this, be it observed, in a case concerned with a contract for the sale of land. Dixon J. says, at pp. 476-477:

“When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach.”

Closer to the present case, in Holland v. Wiltshire (1954) 90 C.L.R. 409 the High Court was directly concerned with a question of damages for[1980] A.C. 367 Page 397

breach of contract for the sale of land. The purchaser having failed to complete, the vendor claimed damages. Dixon C.J. said, at p. 416:

“The proper conclusion is that the vendor proceeded not under the contractual provision but on the footing that the purchasers had discharged him from the obligations of the contract. It follows that he is entitled to sue for unliquidated damages. Some suggestion was made for the defendants appellants that once the contract was treated by the vendor as discharged he could not recover for breach. This notion, however, is based on a confusion with rescission for some invalidating cause. It is quite inconsistent with principle and has long since been dissipated. It is enough to refer to the note upon the subject in Mr. Voumard’s Sale of Land in Victoria (1939), at page 499.”

Voumard’s Sale of Land – judicially approved – p. 508 – is explicit that damages can be recovered.

Then, in a case very similar to the present, McKenna v. Richey [1950] V.L.R. 360, it was decided by O’Bryan J. in the Supreme Court of Victoria that, after an order for specific performance had been made, which in the events could not be carried into effect, even though this was by reason of delay on the part of the plaintiff, the plaintiff could still come to the court and ask for damages on the basis of an accepted repudiation. The following passage is illuminating, at p. 372:

“The apparent inconsistency of a plaintiff suing for specific performance and for common law damages in the alternative arises from the fact that, in order to avoid circuitry of action, there is vested in the one court jurisdiction to grant either form of relief. The plaintiff, in effect, is saying: ‘I don’t accept your repudiation of the contract but am willing to perform my part of the contract and insist upon your performing your part – but if I cannot successfully insist on your performing your part, I will accept the repudiation and ask for damages.’ Until the defendant’s repudiation is accepted the contract remains on foot, with all the possible consequences of that fact. But if, from first to last, the defendant continues unwilling to perform her part of the contract, then, if for any reason the contract cannot be specifically enforced, the plaintiff may, in my opinion, turn round and say: ‘Very well, I cannot have specific performance; I will now ask for my alternative remedy of damages at common law.’ This, in my opinion, is equally applicable both before and after decree whether the reason for the refusal or the failure of the decree of specific performance is due to inability of the defendant to give any title to the property sold, or to the conduct of the plaintiff which makes it inequitable for the contract to be specifically enforced….“

And later the learned judge said, at p. 376:

“It is an appropriate case for a court of equity to say: ‘As a matter of discretion, this contract should not now be enforced specifically, but, in lieu of the decree for specific performance, the

[1980] A.C. 367 Page 398

court will award the plaintiff such damages as have been suffered by her in consequence of the defendant’s breach. That is the best justice that can be done in this case.'”

The learned judge in his judgment fully discusses and analyses the English cases but nevertheless reaches this view.

My Lords, I am happy to follow the latter case. In my opinion Henty v. Schröder, 12 Ch.D. 666, cannot stand against the powerful tide of logical objection and judicial reasoning. It should no longer be regarded as of authority: the cases following it should be overruled.

In particular Barber v. Wolfe [1945] Ch. 187 and Horsler v. Zorro [1975] Ch. 302 cannot stand so far as they are based on the theory of “rescission ab initio” which has no application to the termination of a contract on accepted repudiation.

The second basis for denying damages in such cases as the present is that which underlies the judgment of the Court of Appeal in Swycher’s case. This is really a rationalisation of Henty v. Schröder, 12 Ch.D. 666, the weakness of which case the court well perceived. The main argument there accepted was that by deciding to seek the remedy of specific performance the vendor (or purchaser) has made an election which either is irrevocable or which becomes so when the order for specific performance is made. A second limb of this argument (but in reality a different argument) is that the vendor (or purchaser) has adequate remedies under the order for specific performance so that there is no need, or equitable ground, for allowing him to change his ground and ask for damages.

In my opinion, the argument based on irrevocable election, strongly pressed by the appellant’s counsel in the present appeal, is unsound. Election, though the subject of much learning and refinement, is in the end a doctrine based on simple considerations of common sense and equity. It is easy to see that a party who has chosen to put an end to a contract by accepting the other party’s repudiation cannot afterwards seek specific performance. This is simply because the contract has gone – what is dead is dead. But it is no more difficult to agree that a party, who has chosen to seek specific performance, may quite well thereafter, if specific performance fails to be realised, say, “Very well, then, the contract should be regarded as terminated.” It is quite consistent with a decision provisionally to keep alive, to say, “Well, this is no use – let us now end the contract’s life.” A vendor who seeks (and gets) specific performance is merely electing for a course which may or may not lead to implementation of the contract – what he elects for is not eternal and unconditional affirmation, but a continuance of the contract under control of the court which control involves the power, in certain events, to terminate it. If he makes an election at all, he does so when he decides not to proceed under the order for specific performance, but to ask the court to terminate the contract: see the judgment of Sir Wilfrid Greene M.R. in Austins of East Ham Ltd. v. Macey [1941] Ch. 338 quoted above. The fact is that the election argument proves too much. If it were correct it would deny the vendor not just the right to damages, but the right to “rescind” the contract, but there is no doubt that this right exists: what is in question is only the right on “rescission,” to claim damages.[1980] A.C. 367 Page 399

The authority most relied on to support this argument is in the end the passage already quoted from Williams on Vendor and Purchaser, 4th ed. – I have commented on this. The cases cited relate to different situations where an election might well be regarded as creating a new situation from which subsequent departure would be impossible. Cases relating to acceptance of defective goods, or to waiver or enforcement of forfeiture, or to a decision to sue one set of parties rather than another: Scarf v. Jardine, 7 App.Cas. 345, or to a case of fraud, to be asserted or waived: Clough v. London and North Western Railway Co. (1871) L.R. 7 Ex. 26, are examples, and there are many others, where an election creates, or recognises, a situation from which consequences flow and when the election is irrevocable. But this is clearly not such a case, or the right to “rescind” after an order for specific performance would not have been recognised.

So far as regards the subsidiary argument, it is equally the case that it proves too much, for if correct it would result in a denial of the undoubted power to “rescind.” Moreover the argument is itself refuted by the action taken by the Court of Appeal itself, for after allowing the vendors to rescind they awarded damages under Lord Cairns’ Act. So clearly there was nothing inappropriate or unnecessary in granting the vendors “rescission” and damages. As Goff L.J. pointed out, it was not possible to leave the vendors to “work out” the decree for specific performance – their only remedy (if any) must lie in an award of damages.

In my respectful opinion therefore Swycher’s case [1976] Ch. 319, whether it should be regarded as resting upon Henty v. Schröder, 12 Ch.D. 666, or upon an independent argument based on election was wrongly decided in so far as it denied a right to contractual damages and should so far be overruled. The vendors should have been entitled, upon discharge of the contract, on grounds of normal and accepted principle, to damages appropriate for a breach of contract.

There is one final point, on this part of the case, on which I should make a brief observation. Once the matter has been placed in the hands of a court of equity, or one exercising equity jurisdiction, the subsequent control of the matter will be exercised according to equitable principles The court would not make an order dissolving the decree of specific performance and terminating the contract (with recovery of damages) if to do so would be unjust, in the circumstances then existing, to the other party, in this case to the purchaser. (To this extent, in describing the vendor’s right to an order as “ex debito justitae” Clauson L.J. may have put the case rather too strongly: John Barker & Co. Ltd. v. Littman [1941] Ch. 405, 412.) This is why there was, in the Court of Appeal, rightly, a relevant and substantial argument, repeated in this House, that the non-completion of the contract was due to the default of the vendors: if this had been made good, the court could properly have refused them the relief sought. But the Court of Appeal came to the conclusion that this non-completion, and the ultimate impossibility of completion, was the fault of the purchaser. I agree with their conclusion and their reasons on this point and shall not repeat or add to them.

It is now necessary to deal with questions relating to the measure of damages. The Court of Appeal, while denying the vendors’ right to[1980] A.C. 367 Page 400

damages at common law, granted damages under Lord Cairns’ Act. Since, on the view which I take, damages can be recovered at common law, two relevant questions now arise. (1) Whether Lord Cairns’ Act provides a different measure of damages from the common law: if so, the respondents would be in a position to claim the more favourable basis to them. (2) If the measure of damages is the same, on what basis they should be calculated.

Since the decision of this House, by majority, in Leeds Industrial Co-operative Society Ltd. v. Slack[1924] A.C. 851 it is clear that the jurisdiction to award damages in accordance with section 2 of Lord Cairns’ Act (accepted by the House as surviving the repeal of the Act) may arise in some cases in which damages could not be recovered at common law: examples of this would be damages in lieu of a quia timet injunction and damages for breach of a restrictive covenant to which the plaintiff was not a party. To this extent the Act created a power to award damages which did not exist before at common law. But apart from these, and similar cases where damages could not be claimed at all at common law, there is sound authority for the proposition that the Act does not provide for the assessment of damages on any new basis. The wording of section 2 “may be assessed in such manner as the court shall direct” does not so suggest, but clearly refers only to procedure.

In Ferguson v. Wilson (1866) L.R. 2 Ch. 77, 88, Turner L.J. sitting in a court which included Sir Hugh Cairns himself expressed the clear opinion that the purpose of the Act was to enable a court of equity to grant those damages which another court might give; a similar opinion was strongly expressed by Kay J. in Rock Portland Cement Co. Ltd. v. Wilson (1882) 52 L.J.Ch. 214, and Fry on Specific Performance, 6th ed. p. 602 is of the same opinion. In Wroth v. Tyler [1974] Ch. 30, however, Megarry J., relying on the words “in lieu of specific performance” reached the view that damages under the Act should be assessed as on the date when specific performance could have been ordered, in that case as at the date of the judgment of the court. This case was followed in Grant v. Dawkins [1973] 1 W.L.R. 1406. If this establishes a different basis from that applicable at common law, I could not agree with it, but in Horsler v. Zorro [1975] Ch. 302, 316 Megarry J. went so far as to indicate his view that there is no inflexible rule that common law damages must be assessed as at the date of the breach. Furthermore, in Malhotra v. Choudhury [1980] Ch. 52the Court of Appeal expressly decided that, in a case where damages are given in substitution for an order for specific performance, both equity and the common law would award damages on the same basis – in that case as on the date of judgment. On the balance of these authorities and also on principle, I find in the Act no warrant for the court awarding damages differently from common law damages, but the question is left open on what date such damages, however awarded, ought to be assessed.

(2) The general principle for the assessment of damages is compensatory, i.e., that the innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed. Where the contract is one of sale, this principle normally leads to assessment of damages as at the date of the breach – a principle recognised and embodied[1980] A.C. 367 Page 401

in section 51 of the Sale of Goods Act 1893. But this is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances.

In cases where a breach of a contract for sale has occurred, and the innocent party reasonably continues to try to have the contract completed, it would to me appear more logical and just rather than tie him to the date of the original breach, to assess damages as at the date when (otherwise than by his default) the contract is lost. Support for this approach is to be found in the cases. In Ogle v. Earl Vane (1867) L.R. 2 Q.B. 275; L.R. 3 Q.B. 272 the date was fixed by reference to the time when the innocent party, acting reasonably, went into the market; in Hickman v. Haynes (1875) L.R. 10 C.P. 598 at a reasonable time after the last request of the defendants (buyers) to withhold delivery. In Radford v. De Froberville [1977] 1 W.L.R. 1262, where the defendant had covenanted to build a wall, damages were held measurable as at the date of the hearing rather than at the date of the defendant’s breach, unless the plaintiff ought reasonably to have mitigated the breach at an earlier date.

In the present case if it is accepted, as I would accept, that the vendors acted reasonably in pursuing the remedy of specific performance, the date on which that remedy became aborted (not by the vendors’ fault) should logically be fixed as the date on which damages should be assessed. Choice of this date would be in accordance both with common law principle, as indicated in the authorities I have mentioned, and with the wording of the Act “in substitution for… specific performance.” The date which emerges from this is April 3, 1975 – the first date on which mortgagees contracted to sell a portion of the property. I would vary the order of the Court of Appeal by substituting this date for that fixed by them – viz. November 26, 1974. The same date (April 3, 1975) should be used for the purpose of limiting the respondents’ right to interest on damages. Subject to these modifications I would dismiss the appeal.

LORD SALMON. My Lords, I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Wilberforce. I agree with it, and for the reasons which he gives I also would dismiss the appeal, subject to the variation of the order of the Court of Appeal which he has proposed.

LORD FRASER OF TULLYBELTON. My Lords, I have had the great benefit of reading in draft the speech prepared by my noble and learned friend, Lord Wilberforce. I entirely agree with it and, for the reasons given by him, I also would dismiss this appeal, subject to the alteration of date which he has proposed.

LORD KEITH OF KINKEL. My Lords, I have had the great benefit of reading in draft the speech of my noble and learned friend, Lord Wilberforce. I agree entirely with the reasoning and conclusions therein contained, and that the appeal should accordingly be dismissed subject to variation, in the manner which he proposed, of the order of the Court of Appeal.[1980] A.C. 367 Page 402

LORD SCARMAN. My Lords, I have had the advantage of reading in draft the speech of my noble and learned friend, Lord Wilberforce. I agree entirely with his reasoning and conclusions. I agree that the appeal should be dismissed, subject to the variation proposed by my Lord in the order of the Court of Appeal.Appeal dismissed.

Solicitors: Bircham & Co.; Ward Bowie.

F. C

[COURT OF APPEAL]

ANGLIA TELEVISION LTD. v. REED [1968 A. No. 5132]

1971 July 29

Lord Denning M.R., Phillimore and Megaw L.JJ.

Damages – Contract – Breach – Actor repudiated television contract – Plaintiff’s election to claim damages for wasted expenditure and not loss of profits – Whether pre-contract expenditure recoverable

The defendant, a well known actor, contracted with the plaintiffs to play the leading man’s part in a television play which they were producing. A few days afterwards the defendant repudiated the contract. The plaintiffs could not get a substitute for the defendant and accepted his repudiation. They abandoned the production.

The plaintiffs sued the defendant for damages. They claimed their total wasted expenditure of £2,750. The defendant contended that they could only recover their expenditure after the contract was concluded of £854. Master Elton gave judgment for the plaintiffs for £2,750.

On the defendant’s appeal:-

Held, dismissing the appeal, that the plaintiffs, having elected to claim their wasted expenditure instead of their loss of profits, were not limited to the expenditure incurred after the contract but could claim the expenditure incurred before the contract provided it was reasonably in the contemplation of the parties as likely to be wasted if the contract were broken. Accordingly in the circumstances the plaintiffs were entitled to recover the £2,750.[1972] 1 Q.B. 60 Page 61

Dicta of Tindal C.J. in Hodges v. Earl of Litchfield (1835) 1 Bing. N.C. 492, 498 and Thesiger J. in Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times, April 16, 1969, not followed.

Lloyd v. Stanbury [1971] 1 W.L.R. 535 approved.

The following cases are referred to in the judgment:

Cullinane v. British “Rema” Manufacturing Co. Ltd. [1954] 1 Q.B. 292, [1953] 3 W.L.R. 923; [1953] 2 All E.R. 1257, C.A.

Hodges v. Earl of Litchfield (1835) 1 Bing.N.C. 492.

Lloyd v. Stanbury [1971] 1 W.L.R. 535; [1971] 2 All E.R. 267.

Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times, April 16, 1969; (1969) 113 S.J. 324.

The following additional cases were cited in argument:

McRae v. Commonwealth Disposals Commission (1951) 84 C.L.R. 377.

Wallington v. Townsend [1939] Ch. 588; [1939] 2 All E.R. 225.

APPEAL from Master Elton.

By specially indorsed writ of December 20, 1968, the plaintiffs, Anglia Television Ltd., claimed against the defendant, Robert Reed, that by reason of the defendant’s breach and repudiation of an agreement made in a telephone conversation on August 30, 1968, between Jenia Reissar on behalf of the plaintiffs and Terence Owen of Hugh Francis Ltd. on behalf of the defendant whereby it was agreed, subject to a grant of a permit, that the defendant should perform the role of “Hardy” in a play to be produced and recorded in England for television the plaintiffs were forced to cancel their arrangements for the production and had suffered damage. Particulars of damage included: network fees for supporting artists; director’s fees; designer’s fees; stage manager’s fees; assistant stage manager’s fees; and pre-filming and rehearsal fees for supporting artists. The damages claimed before amendment totalled £2,676.

On March 2, 1971, Master Elton on an assessment of damages pursuant to R.S.C., Ord. 37, r.1 (the plaintiffs having obtained interlocutory judgment for damages to be assessed on May 16, 1970) adjudged that the defendant should pay the plaintiffs £2,750 and costs.

The defendant appealed. The grounds of appeal were that (1) the master was wrong in law in holding that the defendant was liable to the plaintiffs for expenses incurred by them prior to the date of the agreement between the parties; (2) there was no evidence on which the master could hold that the defendant’s conduct made it impossible for the plaintiffs to show that they would have made a profit on their production; (3) the defendant was liable in law only for the expenses incurred by the plaintiffs subsequent to the date of the agreement, namely, expenses of £854.

The facts are stated in the judgment of Lord Denning M.R.

Gerald Butler for the defendant. The appeal is against the assessment of damages. In English law pre-contract expenditure cannot be recovered as damages for loss of expenditure: see Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times. April 16, 1969. There is a clear[1972] 1 Q.B. 60 Page 62

line to be drawn between pre- and post-contract expenditure. All engagements which the plaintiffs entered into before the date of their contract with the defendant are irrelevant. The obligations would be honoured in any events. Thesiger J.’s decision in Perestrello & Companhia Limitada v. United Paint Co. Ltd. is a direct decision in the defendant’s favour.

One has to ask: what were the benefits lost to the plaintiffs by the pre-contractual obligations? What should the defendant have contemplated that the loss of benefit to the plaintiffs would have been if he did not go on with the contract? The law limits the damages for expenditure to post-contractual expenditure. The hypothetical reasonable defendant would say at the time of the contract that he would be liable in the event of his breach of contract for post-contractual but not for pre-contractual obligations. If a housewife goes to a shop to buy apples and buys apples which prove to be worthless, she cannot recover her expenditure in going to the shop: see per Tindal C.J. in Hodges v. Earl of Litchfield (1835) 1 Bing.N.C. 492, 498. Jenkins L.J. stated the general principle in Cullinane v. British “Rema” Manufacturing Co. Ltd. [1954] 1 Q.B. 292, 308: see his reference to “letting the capital expenditure lie where it falls.”

Lloyd v. Stanbury [1971] 1 W.L.R. 535 is against the defendant but what Brightman J. said at p. 546 was obiter and the Perestrello case, The Times, April 16, 1969, was not cited in argument. In the case of anticipatory breach the party who is not in breach must exercise his election reasonably.

If a plaintiff chooses to incur expenditure before a contract is made, he cannot recover that expenditure as damages for breach of that contract: McRae v. Commonwealth Disposals Commission (1951) 84 C.L.R. 377, 412, 415, an Australian case. Wallington v. Townsend [1939] Ch. 588 was cited for the defendant in Lloyd v. Stanbury [1971] 1 W.L.R. 535, 545. No authority has been found where, in a contract for the sale of land which has gone off, pre-contract expenditure has been held to be recoverable.

As to recovery for expenses rendered futile by the breach, see Mayne & McGregor on Damages, 12th ed. (1961), pp. 23-27, paras. 21-25. The argument in para. 25 is adopted. Treitel’s Law of Contract, 3rd. ed (1970), p. 796, points out that although expenses incurred in reliance upon the contract may be recovered this excludes expenses incurred before the contract (see note 60). Accepting that a plaintiff may elect whether to claim expenses rendered futile by the breach or loss of profits, he is limited to post-contract expenses unless the contrary is envisaged in the contract.

Andrew Bateson Q.C. and Desmond Browne for the plaintiffs were not called upon to argue.

LORD DENNING M.R. Anglia Television Ltd., the plaintiffs, were minded in 1968 to make a film of a play for television entitled “The Man in the Wood.” It portrayed an American man married to an English woman. The American has an adventure in an English wood. The film was to last for 90 minutes. Anglia Television made many arrangements in advance. They arranged for a place where the play was to be filmed. They employed a director, a designer and a stage manager, and so forth.[1972] 1 Q.B. 60 Page 63

They involved themselves in much expense. All this was done before they got the leading man. They required a strong actor capable of holding the play together. He was to be on the scene the whole time. Anglia Television eventually found the man. He was Mr. Robert Reed, the defendant, an American who has a very high reputation as an actor. He was very suitable for this part By telephone conversation on August 30, 1968, it was agreed by Mr. Reed through his agent that he would come to England and be available between September 9 and October 11, 1968, to rehearse and play in this film. He was to get a performance fee of £1,050, living expenses of £100 a week, his first class fares to and from the United States, and so forth. It was all subject to the permit of the Ministry of Labour for him to come here. That was duly given on September 2, 1968. So the contract was concluded. But unfortunately there was some muddle with the bookings. It appears that Mr. Reed’s agents had already booked him in America for some other play. So on September 3, 1968, the agent said that Mr. Reed would not come to England to perform in this play. He repudiated his contract. Anglia Television tried hard to find a substitute but could not do so. So on September 11 they accepted his repudiation They abandoned the proposed film. They gave notice to the people whom they had engaged and so forth.

Anglia Television then sued Mr. Reed for damages. He did not dispute his liability, but a question arose as to the damages. Anglia Television do not claim their profit. They cannot say what their profit would have been on this contract if Mr. Reed had come here and performed it. So. instead of claim for loss of profits, they claim for the wasted expenditure. They had incurred the director’s fees. the designer’s fees, the stage manager’s and assistant manager’s fees, and so on. It comes in all to £2,750. Anglia Television say that all that money was wasted because Mr. Reed did not perform his contract.

Mr. Reed’s advisers take a point of law. They submit that Anglia Television cannot recover for expenditure incurred before the contract was concluded with Mr. Reed. They can only recover the expenditure after the contract was concluded. They say that the expenditure after the contract was only £854.65, and that is all that Anglia Television can recover.

The master rejected that contention: he held that Anglia Television could recover the whole £2,750; and now Mr. Reed appeals to this court.

Mr. Butler, for Mr. Reed, has referred us to the recent case of Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times, April 16, 1969, in which Thesiger J. quoted the words of Tindal C.J. in Hodges v. Earl of Litchfield (1835) 1 Bing. N.C. 492, 498:

“The expenses preliminary to the contract ought not to be allowed. The party enters into them for his own benefit at a time when it is uncertain whether there will be any contract or not.”

Thesiger J. applied those words, saying: “In my judgment pre-contract expenditure, though thrown away, is not recoverable.”

I cannot accept the proposition as stated. It seems to me that a plaintiff in such a case as this has an election: he can either claim for loss of[1972] 1 Q.B. 60 Page 64

profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits – or if he cannot prove what his profits would have been – he can claim in the alternative the expenditure which has been thrown away, that is, wasted, by reason of the breach. That is shown by Cullinane v. British “Rema” Manufacturing Co. Ltd. [1954] 1 Q.B. 292, 303, 308.

If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred afterthe contract was concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken. Applying that principle here, it is plain that, when Mr. Reed entered into this contract, he must have known perfectly well that much expenditure had already been incurred on director’s fees and the like. He must have contemplated – or, at any rate, it is reasonably to be imputed to him – that if he broke his contract, all that expenditure would be wasted, whether or not it was incurred before or after the contract. He must pay damages for all the expenditure so wasted and thrown away. This view is supported by the recent decision of Brightman J. in Lloyd v. Stanbury [1971] 1 W.L.R. 535. There was a contract for the sale of land. In anticipation of the contract – and before it was concluded – the purchaser went to much expense in moving a caravan to the site and in getting his furniture there. The seller afterwards entered into a contract to sell the land to the purchaser, but afterwards broke his contract. The land had not increased in value, so the purchaser could not claim for any loss of profit. But Brightman J. held, at p. 547, that he could recover the cost of moving the caravan and furniture, because it was “within the contemplation of the parties when the contract was signed.” That decision is in accord with the correct principle, namely, that wasted expenditure can be recovered when it is wasted by reason of the defendant’s breach of contract. It is true that, if the defendant had never entered into the contract, he would not be liable, and the expenditure would have been incurred by the plaintiff without redress; but, the defendant having made his contract and broken it, it does not lie in his mouth to say he is not liable, when it was because of his breach that the expenditure has been wasted.

I think the master was quite right and this appeal should be dismissed.

PHILLIMORE L.J. I agree.

MEGAW L.J. I also agree.Appeal dismissed with costs.

Solicitors: Richards, Butler & Co.; Crawley & de Reya.

A. H. B.

 

Documents are material to the matters in question in the action within the meaning of Order XXXI., rule 12, if it is not unreasonable to suppose that they may contain information directly or indirectly enabling the party seeking discovery, either to advance his own case, or to damage the case of his adversary.

The plaintiff company sued the defendant company for breach of contract: the defence to the action was that no contract had been concluded, and that only negotiations had taken place between the parties. The defendants having obtained an order for an affidavit of documents, the plaintiffs set out, amongst others, their minute-book, which referred to certain documents and letters; the entries as to these documents and letters were of a date subsequent to the date of the alleged breach of contract; the documents and letters were not set out by the plaintiffs in their affidavit. The defendants claimed a further and better affidavit from the plaintiffs, setting out the documents and letters above-mentioned, on the ground that they might show that after the alleged breach the parties were still negotiating, and might tend to disprove the plaintiffs’ allegation that a contract had been concluded:-

Held, that the plaintiffs were bound to make a further affidavit of documents.

Dec. 16, 20. Shiress Will, for the defendants. The defendants are entitled to an order for a further affidavit as to documents on the part of the plaintiffs. The affidavit which has been made has disclosed certain entries in the minute book of the plaintiff company, and amongst these is one of the 2nd of November, 1881, which refers to a letter and two telegrams, and there are others of the 3rd, 8th, and 16th of November, 1881, also referring to telegrams and letters. If the minutes themselves are relevant, so must be the matters which are therein referred to, and the right of the defendants to a further affidavit and discovery as to these documents comes within the rule laid down by

BRETT, L.J. In this case the defendants under the rules and orders took out a summons requiring the plaintiffs to make an

(1882) 11 Q.B.D. 55 Page 61

affidavit of all documents in their possession or under their control relating to any matter in question in the action: thereupon the plaintiffs made an affidavit setting out many documents, which they admit to be in their possession and under their control, and which they admit, in some sense, to relate to matters in question in the action. The defendants have taken out another summons, which calls upon the plaintiffs to shew cause why they should not make a further affidavit. The meaning of that summons seems to me to be this, that the plaintiffs did not in their affidavit set out all the documents which they ought to have set out in that affidavit. Upon this second summons of the defendants the first question raised is, what must the defendants shew in order to support it. It seems to me that they must shew necessarily that the plaintiffs had not set out in the affidavit all the documents which they ought to have set out. Before Jones v. Monte Video Gas Co. (1) was decided, uncertainty was felt as to the sources from which the Court might derive information in order to determine whether the party, against whom the application was made, had given a proper answer. In this case the plaintiffs in their affidavit set out all the documents which in their view they ought to set out. It was decided in Jones v. Monte Video Gas Co. (1) that a contentious affidavit, as it was called, of the party making the second application, can not be looked at, that is to say, that if nothing appeared in the affidavit made on the first summons, and if nothing can be gathered from other sources which I will presently mention, the party taking out the second summons cannot be heard to say in opposition to the affidavit of his opponent that he believes, and has good grounds for believing, that that opponent has other documents material to the question in the action. It was held in Jones v. Monte Video Gas Co. (1) that the only sources into which the Court could look in order to ascertain whether the first affidavit was sufficient or not, was the affidavit itself, or the documents referred to in that affidavit, or the pleadings which had been delivered between the parties, and that in order to justify an order upon the second summons the Court must be satisfied from one of those sources that the party

• (1)     5 Q.B.D. 556.

(1882) 11 Q.B.D. 55 Page 62

making the first affidavit had omitted to set out in it some documents which are material to the question in dispute in the action. The case of Jones v. Monte Video Gas Co. (1) did not enter upon the question as to the nature of the documents, which may be required to be produced. In the present case the sources from which the defendants say that they can shew that the plaintiffs have not set out all the material documents, are the documents mentioned in the plaintiffs’ affidavit. Therefore the question in the present case is not governed by Jones v. Monte Video Gas Co. (1); it goes beyond the decision in that case. The question is not as to the sources to which the Court must look, but as to the nature of the documents which ought to be set out in the affidavit. The nature of the documents, which ought to be set out in the affidavit, may be gathered from the rules and orders of the Judicature Acts. The party swearing the affidavit is bound to set out all documents in his possession or under his control relating to any matters in question in the action. Then comes this difficulty: What is the meaning of that definition? What are the documents which are documents relating to any matter in question in the action? In Jones v. Monte Video Gas Co. (1) the Court stated its desire to make the rule as to the affidavit of documents as elastic as was possible. And I think that that is the view of the Court both as to the sources from which the information can be derived, and as to the nature of the documents. We desire to make the rule as large as we can with due regard to propriety; and therefore I desire to give as large an interpretation as I can to the words of the rule, “a document relating to any matter in question in the action.” I think it obvious from the use of these terms that the documents to be produced are not confined to those, which would be evidence either to prove or to disprove any matter in question in the action; and the practice with regard to insurance cases shews, that the Court never thought that the person making the affidavit would satisfy the duty imposed upon him by merely setting out such documents, as would be evidence to support or defeat any issue in the cause.

The doctrine seems to me to go farther than that and to go as

• (1)     5 Q.B.D. 556.

(1882) 11 Q.B.D. 55 Page 63

far as the principle which I am about to lay down. It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words “either directly or indirectly,” because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, which may have either of these twa consequences: the question upon a summons for a further affidavit is whether the party issuing it can shew, from one of the sources mentioned in Jones v. Monte Video Gas Co. (1), that the party swearing the first affidavit has not set out all the documents falling within the definition which I have mentioned and being in his possession or control. I agree that the party issuing the summons for a further affidavit is bound by the description given in the sources of information mentioned in Jones v. Monte Video Gas Co. (1): that is to say, he is bound to a certain extent: I do not think that he would be bound absolutely by every description of their contents if the Court can see, from the nature of them, that the description of them is not or may not reasonably be correct. I do not think that the Court is bound any more on the second summons than on the first to accept absolutely everything which the party swearing the affidavit says about the documents, but the Court is bound to take his description of their nature. The question must be, whether from the description either in the first affidavit itself or in the list of documents referred to in the first affidavit or in the pleadings of the action, there are still documents in the possession of the party making the first affidavit which, it is not unreasonable to suppose, do contain information which may, either directly or indirectly, enable the party requiring the further affidavit either to advance his own case or to damage the case of his adversary. In order to determine whether certain documents are within that description,

• (1)     5 Q.B.D. 556.

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it is necessary to consider what are the questions in the action: the Court must look, not only at the statement of claim and the plaintiffs’ case, but also at the statement of defence and the defendants’ case. In the present action it is true to say that the contention of the plaintiffs is that there was a concluded agreement, and that there was a breach of that agreement on a particular day. I quite agree that these documents, which are referred to in the minutes to which our attention has been drawn, cannot affect the plaintiffs’ case if it be true; for the documents, of which production is now sought, came into existence after the alleged breach. But the defendants’ case is that there never was a concluded agreement, and of course there never was or could be a breach of an agreement which never existed. The defendants’ case is that, from the beginning to the end of the whole transaction, even up to the time of bringing the action, the whole matter was in negotiation – there was one unbroken series of negotiations. Therefore, if the defendants can shew that there are documents in the possession of the plaintiffs which, it is not unreasonable to suppose, do contain information which may support the defendants’ case, those documents, as it seems to me, ought to have been set out by the plaintiffs in the original affidavit, and must be set out by them in a further affidavit. That drives us to the question whether the documents are such as do contain, in our opinion, matters which may support the defendants’ case that there were merely continuing negotiations. Take the minute with regard to documents No. 2, according to which the president read a letter and two despatches received from Mr. Adam, and setting forth to the company the new difficulties which the Peruvian Guano Company were raising. It is said that these documents cannot be material because they are subsequent to the date when the contract is alleged to have been entered into; but as the case for the defendants is that there were continuing negotiations, new propositions in a continuing negotiation are part of the negotiation; and therefore it seems to me that the defendants do shew that the plaintiffs have documents in their possession which may reasonably be supposed to support the defendants’ case, if the defendants’ case is true. I have felt very great difficulty in differing from Pearson, J., because there is no

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judge whose opinion I should more anxiously regard: but as to No. 2, I am bound to say that I think he gave too minute a construction to rule 12 of Order XXXI., and that he insufficiently considered not only what was the plaintiffs’ case, but also what was the defendants’ case. With regard to the other documents, except No. 3, to which my learned Brother has alluded, it seems to me that they are in the same category as No. 2, unless they are attempts to negotiate a settlement or a compromise. If I thought that they did appear to be attempts at negotiation for a settlement, I should be clear that no affidavit ought to be made with regard to them, because negotiations to effect a settlement cannot be material with regard to matters in dispute in the action. I may be wrong, but I have come to the conclusion that it is not unreasonable to suppose that these are not negotiations for a settlement, but that they do contain information which may shew that there were continuing negotiations, and therefore they seem to me to be within the same category as documents No. 2. It may turn out that my view is wrong, and that these documents are attempts to negotiate a settlement, and if that is so, they will be properly rejected if they are offered in evidence at the trial; but what I say is, the rule which governs us at this moment is that they appear to be documents which, it is not unreasonable to suppose, do contain information which may support the defendants’ case. Therefore I think that the further affidavit must be made with regard to them.

This judgment does not at all determine whether the defendants can have inspection of them after the further affidavit has been made, for after the affidavit has been made and privilege in respect of them has been claimed, on the ground that they are sworn to be matters of negotiation for a compromise, it may be that the defendants will have no right to inspect them. That is a matter as to which I say nothing; I give no opinion about it. The further affidavit must be made on the ground which I have mentioned; but with regard to documents No. 3, I think it impossible to say that the plaintiffs ought in their first affidavit to have set forth documents which are not in either their power or their control, and therefore, on the ground that the defendants, who now ask for a further affidavit with regard to them, fail to

(1882) 11 Q.B.D. 55 Page 66

shew that they are documents which ought to have been mentioned in the first affidavit, no further affidavit is to be made as to them. I repeat that our present judgment does not convey any opinion as to the effect of the documents when they have been disclosed, and when they are offered in evidence at the trial.

Solicitors for plaintiffs: Freshfields & Williams.

Solictors for defendants: C. & S. Harrison & Co.

J. E. H.

*134 Walter Gibbins and Edith Rose Proctor

Court of Criminal Appeal

22 April 1918

(1919) 13 Cr. App. R. 134

Mr. Justice Darling , Mr. Justice McCardie and Mr. Justice Salter

April 22, 1918

The discretion of a judge at the trial whether defendants jointly indicted should be tried separately must be judicially exercised. The head-note to Lee and Parkes, above, p. 39, is too widely stated.

The neglect by a father of a child living with him may be so great, even though he provides the funds for the child’s maintenance, as to amount to murder, if through neglect the child dies. A woman living with a man in such circumstances, if she has accepted charge of the child, may also be guilty of murder.

These were appeals against conviction on matters of law. Appellants were convicted, on the 18th March, 1918, at the Leeds Assizes, before Roche J., of murder, and were sentenced to death.

R. A. Bateman for appellant Gibbins (under s. 10 of the Criminal Appeal Act ), who was not present. The appellants were convicted of the murder of Gibbins’s daughter Nelly, a girl of seven, it being alleged that she died of starvation as the result of a long course of cruelty and neglect at the hands of both appellants. Before the trial opened application was made on behalf of both prisoners that they should be tried separately; this application was refused, and I submit that Gibbins’s trial was prejudiced thereby, especially as this was a case of mutual recrimination, each prisoner seeking to put the blame on the other: Lee and Parkes, 13 Cr. App. R. 39, 1917 .

[ Darling J.: The head-note there goes beyond the decision of the Court, which laid down no rule of general application.]

Moreover, evidence of statements and conversations was given *135 which were admissible against one appellant and not against the other.

[ Darling J.: The matter is one for the discretion of the judge and unless the discretion is not exercised judicially this Court will not interfere: Yousry, 11 Cr. App. R. 13, 1914 .]

The evidence was not sufficient to support a verdict of murder; it should have been manslaughter only. Gibbins was in regular employment earning good wages, and he gave evidence that he gave the whole of them to Proctor. It was his duty to provide the money; it was hers to provide food. The child was not hers, but she was living with Gibbins, and no doubt had assumed some duty towards the deceased child, which might justify a verdict of murder against her; seeSaunders, 7 C. & P. 277, 1836 . Gibbins was out at work all day, and was told that the child was all right. The prosecution must prove that he knew of the child’s condition, and, to justify a verdict of murder, that he took an active part. On the evidence the verdict should have been guilty of manslaughter: Bubb and Hook, 4 Cox C. C. 457, 1850 . No intent to kill was proved.

[ McCardie J. referred to Conde, 10 Cox C. C. 547, 1867 .]

A photograph of the deceased child was put in evidence which was taken after the child had been buried for a month. It was said that there had been no decomposition, but the evidence was most prejudicial to the prisoners, and therefore should have been excluded: Christie, 1914, A. C. 545; 83 L. J. K. B. 1097; 111 L. T. 220; 78 J. P. 321; 24 Cox C. C. 249; 58 S. J. 515; 30 T. L. R. 471; 10 Cr. App. R. 141 .

F. J. O. Coddington for appellant Proctor (under s. 10 of the Criminal Appeal Act ), who was present. A separate trial was especially necessary in the interests of Proctor, and the refusal to grant a separate trial amounted to a miscarriage of justice.

The judge misdirected the jury on the distinction between murder and manslaughter. There must be a positive withholding of food which is available to found a verdict of murder here. If money is given and not food, a verdict of murder would only be *136 justified where the money is ear-marked for the particular person. The legal obligation to maintain is on the husband, and therefore Proctor could not be convicted of manslaughter: Forsyth , Russell on Crimes, 7th ed., 671, in 1899. She was de facto the wife of Gibbins, and in such cases the wife has been held to be the servant of the husband. Unless she withheld food actually supplied she cannot be convicted of manslaughter, and probably not of murder: Squire , 1 Russ. Cr., 7th ed., 668, 670, in 1799; Saunders , above; Instan, 1893, 1 Q. B. 450; 62 L. J. M. C. 86; 5 R. 248; 68 L. T. 420; 41 W. R. 368; 17 Cox C. C. 602; 57 J. P. 282; C. C. R. ; Lee and Parkes , above.

Shortt, K.C. and Sir Robert Aske for the Crown, were not called upon.

Darling J.:

The two appellants were indicted and tried together for the wilful murder of Nelly Gibbins, the daughter of Gibbins. The facts were that Gibbins’s wife had left him, and he was living in adultery with Proctor. There were several children, one of whom was the child of Proctor, in the house. He earned good wages, which he brought home and gave to Proctor to maintain the house and those in it. There is no evidence that there was not enough to keep them all in health. And all were looked after except one, namely Nelly, who was starved to death. Her organs were healthy, and there was no reason why she should have died if she had been supplied with food. She was kept upstairs apart from the others, and there was evidence that Proctor hated her and cursed her, from which the jury could infer that she had a very strong interest in her death.

When they were put on their trial both counsel applied that the prisoners should be tried separately. Thereupon Roche J. said, in answer to the suggestion that it would be impossible to separate the evidence against the two, “I have no doubt it will be done, and can be done without any detriment.” The trial proceeded after that. The rule is, that it is a matter for the discretion of the judge at the trial whether two people jointly indicted should be tried together or separately. But the judge must exercise his discretion judicially. If he has done so this Court will not interfere, but that is subject to this qualification. If it appeared to this Court that a miscarriage of justice had resulted *137 from the prisoners being tried together it would quash the conviction. Here it is clear that Roche J. exercised his discretion; he separated the defences carefully, pointing out what was evidence against one prisoner, and not against the other. It is not enough to say that counsel could have defended them more easily if they had been tried separately. There is no ground for thinking that there was any miscarriage of justice. There may have been many things made clear to the jury which would not have been made clear if the prosecution had been embarrassed by having to deal with the two cases separately. The whole story was before the jury of what went on in the house where the two appellants lived together. There is no ground for thinking that either of them was improperly prejudiced by their being tried together.

Several small criticisms have been made which it is not necessary to consider, since there is nothing to lead us to suppose that the verdict was arrived at wrongly in consequence of these matters. There remains the question whether the judge misdirected the jury on a point of law. Had he done so on a really material point we should quash the conviction, unless it came within the proviso to s. 4 (1) . But the misdirection here complained of is on a crucial matter, where he told the jury what they must find in order to convict either prisoner of murder. He said, “The charge against the prisoners is, in the first place, that they killed this child Nelly, or caused her death, by malice aforethought. That means they intended she should die and acted so as to produce that result.” If that is a misdirection it is one in favour of the prisoners. “In dealing with that you will of course remember, and it is my duty to tell you, that very rarely will people say when they do such a thing that they intended to produce such a result. Sometimes they do say that they killed a person and intended to do so, but rarely, and as a rule you have to judge of persons’ intentions from their acts, they being reasonable persons, and there is no suggestion here at all that either of these prisoners was in any way insane, being reasonable persons you have to deal with, you must judge of them as understanding the nature of the act they are doing, and if you think that one or other of those prisoners wilfully and intentionally withheld food from that child so as to cause her to weaken and to cause her grievous bodily injury, as the result of which she died, it is not necessary for you to find that she intended or he intended to kill the child *138 then and there. It is enough if you find that he or she intended to set up such a set of facts by withholding food or anything as would in the ordinary course of nature lead gradually but surely to her death.” In our opinion that direction simply fulfils the conditions which a judge should observe in directing the jury in such a case as this.

There are other places where this is alluded to; for instance, where the judge said: “As she could see it,” that is Nelly’s condition, “and as no steps were taken by her it is consistent, and only consistent—that is the submission—with the intention to work most grievous bodily harm to this child, and to bring about her death. If you think so, gentlemen, serious as it is, it will be your duty to find a verdict of murder.” Now for this there is ample authority. It is sufficient to refer to Bubb and Hook , where Williams J. said: “It remains for me to explain to what extent she is responsible. If the omission or neglect to perform the duty was malicious, then the indictment would be supported, and the crime of murder would be made out against the prisoner; but if the omission or neglect were simply culpable, but not arising from a malicious motive on the part of the prisoner, then, though it would be your duty to find her guilty, it should be of manslaughter only. And here it becomes necessary to explain what is meant by the expression malicious, which is thus used. If the omission to provide necessary food or raiment was accompanied with an intention to cause the death of the child, or to cause some serious bodily injury to it, then it would be malicious in the sense imputed by this indictment, and in a case of this kind it is difficult, if not impossible, to understand how a person who contemplated doing serious bodily injury to the child by the deprivation of food, could have meditated anything else than causing its death.” The word used is “contemplated,” but what has to be proved is an intention to do grievous bodily injury. In our opinion the judge left the question correctly to the jury, and there is no ground for interfering with the convictions for those reasons.

It has been said that there ought not to have been a finding of guilty of murder against Gibbins. The Court agrees that the evidence was less against Gibbins than Proctor, Gibbins gave her money, and is far as we can see it was sufficient to provide for the wants of themselves and all the children. But he lived in the house and the child was his own, a little girl of seven, and *139 he grossly neglected the child. He must have known what her condition was if he saw her, for she was little more than a skeleton. He is in this dilemma; if he did not see her the jury might well infer that he did not care if she died; if he did he must have known what was going on. The question is whether there was evidence that he so conducted himself as to shew that he desired that grievous bodily injury should be done to the child. He cannot pretend that he shewed any solicitude for her. He knew that Proctor hated her, knew that she was ill and that no doctor had been called in, and the jury may have come to the conclusion that he was so infatuated with Proctor, and so afraid of offending her, that he preferred that the child should starve to death rather than that he should be exposed to any injury or unpleasantness from Proctor. It is unnecessary to say more than that there was evidence that Gibbins did desire that grievous bodily harm should be done to the child; he did not interfere in what was being done, and he comes within the definition which I have read, and is therefore guilty of murder.

The case of Proctor is plainer. She had charge of the child. She was under no obligation to do so or to live with Gibbins, but she did so, and receiving money, as it is admitted she did, for the purpose of supplying food, her duty was to see that the child was properly fed and looked after, and to see that she had medical attention if necessary. We agree with what Lord Coleridge C.J. said in Instan , above: “There is no case directly in point, but it would be a slur upon, and a discredit to the administration of, justice in this country if there were any doubt as to the legal principle, or as to the present case being within it. The prisoner was under a moral obligation to the deceased from which arose a legal duty towards her; that legal duty the prisoner has wilfully and deliberately left unperformed, with the consequence that there has been an acceleration of the death of the deceased owing to the non-performance of that legal duty.” Here Proctor took upon herself the moral obligation of looking after the children; she was de facto , though not de jure , the wife of Gibbins and had excluded the child’s own mother. She neglected the child undoubtedly, and the evidence shews that as a result the child died. So a verdict of manslaughter at least was inevitable.

But it is necessary to go further and see whether it was murder. *140 The evidence is that she had plenty of money; that she kept the child upstairs insufficiently supplied with food; that she hated the child and hit her. There is also evidence that when the child died of starvation both appellants took part in hiding the body and preventing the death from being known. They concocted a story that she had been sent away and was still alive. There is evidence that Proctor told Gibbins to bury the child out of sight, and that he did so in the brickyard where he worked. The jury came to the conclusion that she had done more than wickedly neglect the child; she had deliberately withheld food from it, and therefore we come to the conclusion that there was evidence which justified the jury in returning a verdict against her, not merely of manslaughter, but of murder. The appeals are therefore dismissed.

Appeals dismissed .

A. L. B. T.

*141

Permanent Stay

• Connelly v DPP [1964] AC 1254
• Lee Ming Tee (No 1) (2001) 4 HKCFAR 133; Yip Kai Foon [1999] 1 HKLRD 277; Ng Chun To Raymond [2013] 5 HKC 390
• Shum Chiu [2011] 2 HKLRD 746 [deliberate infringement by ICAC of co-defendant’s legal professional privilege]
• Ng Wai Man [1998] 2 HKLRD 1 [accomplice’s pre-trial conduct and general unreliability – delay – adverse publicity]
• double jeopardy – Yeung Chun Pong & Ors v SfJ (2009) 12 HKCFAR 867 [a magistrates’ court has no jurisdiction to entertain autrefois pleas – it only has an implied power to stay committal proceedings to prevent abuse of process – the autrefois pleas are preferably made before the High Court where stay of proceedings under rule against double jeopardy can be applied – Yeung Chun Pong & Ors v SfJ (2006) 9 HKCFAR 836]

Prohibition of reporting the proceeding

• R v Mohamed Hashim Shamsudin (unrep., HCCC 262/1986, Roberts CJ, 14 January 1987)

Disclosure

• Lee Ming Tee (No 2) (2003) 6 HKCFAR 336
• Chan Kau Tai [2006] 1 HKLRD 400

Agreed Facts

• should be read out – silent trials are not permitted – R v Kwok Chi Kwan [2003] 1 HKC 696

Cross-examinations

• antecedent statement by accused – co-accused entitled to cross-examine accused on statement – prosecution counsel not entitled to do so – Law Chung Ki & Anor (2005) 8 HKCFAR 701
• vulnerable witnesses – Harjani, Kishore Mohanlal [2017] 3 HKLRD 1
• as to veracity – Wong Sau Ming (2003) 6 HKCFAR 135
• confessions – co-accused – prosecution sought to compare differences in confessions for purpose of refuting allegation that confessions concocted – not permissible – Wong Wai Man & Ors (2000) 3 HKCFAR 322

Closing speeches

• Leung Chun Kit Brandon [2018] HKCFA 30

Directions

• Summary of overall principles – Lin Ping Keung (2005) 8 HKCFAR 52; 譚曙光 (unrep., CACC 30/2016, Pang JA, 6 September 2016)
• “Fundamental that in a criminal trial before a jury, every defendant is entitled to have his defence – however implausible, even if it appears to be an affront to common sense – fairly and accurately put to the jury for its consideration” – Hon Tsz Yin [2011] 5 HKLRD 447, para. 63
• Burden and standard of proof – Wong Wai Man (No 2) [2003] 4 HKC 517 [perhaps in many cases, the standard directions as to burden and standard of proof may be enough,” it is sometimes essential to give special directions modelled upon R v Liberato (1985) 159 CLR 507 especially when they jury is clearly in some difficulty as to the treatment of the prosecution and defence evidence] – jury should not be told in such absolute terms that it if it was not sure (that is, not satisfied) that what the defence witnesses were saying was actually true, then it hard to disregard such evidence for all purposes.
• Wrong to direct jury that the police officers are likely to be more credible and reliable than other witnesses because of the possible consequences to them – Lee Fuk Hing (2004) 7 HKCFAR 600
• Inference from circumstantial evidence – Tang Kwok Wah, Dixon (2002) 5 HKCFAR 209; Nguyen Anh Nga (2017) 20 HKCFAR 149
• When materials prejudicial to the defendant are placed before the jury – 嚴文浩 [2018] HKCA 72, para. 46
• Directions on uncharged acts – 郭慶 [2010] 3 HKLRD 761
• Direction on alternative verdicts – Ho Hoi Shing (2008) 11 HKCFAR 354
• Good character direction – Tang Siu Man (No 2) (1997-1998) 1 HKCFAR 107
• Lies direction – Mo Shiu Shing [1999] 2 HKLRD 155; Chan Chun Tak [1999] 1 HKC 169; Yuen Kwai Choi (2003) 6 HKCFAR 113; Jim Fai (2006) 9 HKCFAR 85
• Other post-offence conducts – Must the there be evidence from the defence to suggest the “other possible innocent explanations”? 藍順財 (unrep., CACC 186/2017, Yeung VP, 24 July 2018)
• Departing from specimen directions? Yeung Chun Hin [2018] HKCA 712 [per Macrae VP “19. … The danger, with respect, of judges departing from the terms of a carefully crafted Specimen Direction, particularly one which prescribes (as it does here) a structured process of analysis for the jury in its fact-finding task, is that the result risks losing both the content and the emphasis of the direction. Furthermore, where the highest courts of various common law jurisdictions, including our own, have wrestled over many years with the problem of how to direct juries where admissions are said to have come about in circumstances of oppression and have produced a Specimen Direction specifically designed to address that problem, a departure from its terms is a particularly unwise course. The suggested Specimen Direction sets out a progressive step‑by‑step approach for the jury, who might otherwise be confused by the interaction between an assessment of the truth and reliability of a confession and any circumstances of oppression which might impinge on that assessment.”] c.f. Chung Ka Lun [2018] 4 HKLRD 229 [observations that in cases involving conspiracy as opposed to substantive trafficking, para.36.1(c) of Specimen Directions in Jury Trials unnecessary and confusing – suggesting that specimen directions are not perfect and by no means straitjackets]; Tang Siu Man (No 2) (1997-1998) 1 HKCFAR 107 [“(2) Appellate courts had strained to avoid legalism in criminal practice so as not to tie up trial judges with artificial rules of practice. While such rules sometimes avoided real injustice and provided uniformity, they had not evolved simply for this purpose, nor, did they lessen the burden on appeal courts. They also tended to make the trial process mechanical. The modern tendency was to limit the range of compulsory standard directions and rules purporting to cover all cases must necessarily be scrutinised with care ( R v Hester [1973] AC 296 , Vetrovec v The Queen (1982) 136 DLR (3d) 89 and McKinney v The Queen (1990-91) 171 CLR 468 considered). (See pp.120F-121C.)”]

Jury

• No right to elect for a jury trial under Basic Law – Chiang Lily v SfJ (2010) 13 HKCFAR 208
• Sleeping jurors – R v Tam Chung Shing & Ors [1988] HKC 28
• contrary to direction of judge, jury searched Internet before returning verdict and knew defendant on retrial – unfair and prejudicial to defendant – directions regarding use of Internet – warning that court would refer jurors who carried out Internet research contrary to judge’s directions to Department of Justice for possible prosecution for contempt – Chan Huandi [2016] 2 HKLRD 384

Disposition of a criminal case

• S v Recorder of Manchester [1971] AC 481 – the two meanings of “conviction” – followed in SfJ v Yuen Lit Ping [1999] 1 HKC 476

Presumption of innocence

• Lam Kwong Wai & Anor (2006) 9 HKCFAR 574; Ng Po On & Anor (2008) 11 HKCFAR 91

Right to Silence

• Lee Fuk Hing (2004) 7 HKCFAR 600
• whether could be circumstances in which defendants’ failure to give evidence could be regarded as giving prosecution case more probative force – Li Defan & Anor (2002) 5 HKCFAR 320
• Cross-examination of defendant infringing right to silence yields inadmissible evidence – where sole and critical issue at trial and on appeal is the defendant’s credibility, that amounts to material irregularity – Ata Asaf (2016) 19 HKCFAR 225

On May 30, 1968, the appellant, then aged 16, appeared before a juvenile court on a charge of attempted rape. He consented to be tried summarily, and pleaded guilty. Before the end of that day’s hearing that plea had been accepted and the magistrates had entered a finding of guilt. The hearing was then adjourned until June 20, 1968, for the purpose of inquiry into the appellant’s physical and mental condition.

On the adjourned hearing the appellant was legally represented and his solicitor, having drawn the attention of the court to the appellant’s mental condition and to what were said to be instances of previous spurious confessions on his part, asked that he be allowed to withdraw his plea of guilty and to plead not guilty instead. The magistrates, however, refused the application on the grounds that they were functi officio and had no such authority. They thereupon proceeded to consider the medical reports and to make a hospital order against the appellant under section 60 of the Mental Health Act, 1959.

On appeal:-

Held, allowing the appeal, that a court of summary jurisdiction which had accepted a plea of guilty to the offence charged was not in law debarred from permitting (at any time before passing sentence) a plea of not guilty to be substituted. That, accordingly, on the facts found it was open to the juvenile court on June 20, 1968, to permit the appellant to withdraw his plea of guilty and to substitute therefor a plea of not guilty (post, pp. 491B, 498G – 499F,504E, G – 505A, 507H – 508A).

Observations of Lord Goddard C.J. in Rex v. Norfolk Justices, Ex parte Director of Public Prosecutions [1950] 2 K.B. 558, 569; [1950] 2 All E.R. 42, D.C. applied.

• 1     Magistrates’ Courts Act, 1952, s. 13: “(3) If the accused pleads guilty, the court may convict him without hearing evidence.”
• S. 14: “(3) A magistrates’ court may, for the purpose of enabling inquiries to be made or of determining the most suitable method of dealing with the case, exercise its power to adjourn after convicting the accused and before sentencing him or otherwise dealing with him; but, if it does so, the adjournment shall not be for more than three weeks at a time.”

[1971] A.C. 481 Page 482

Reg. v. Guest, Ex parte Anthony [1964] 1 W.L.R. 1273; [1964] 3 All E.R. 385, D.C. and Reg. v. Gore Justices, Ex parte N. (An Infant) [1966] 1 W.L.R. 1522; [1966] 3 All E.R. 991, D.C. overruled.

Rex v. Sheridan [1937] 1 K.B. 223, C.C.A. and Rex v. Grant [1936] 2 All E.R. 1156, C.C.A. considered.

Decision of the Divisional Court reversed.

The following cases are referred to in their Lordships’ opinions:

Burgess v. Boetefeur (1844) 7 Man. & G. 481.

Reg. v. Ackroyd and Jagger (1843) 1 Car. & Kir. 158.

Reg. v. Blaby [1894] 2 Q.B. 170.

Reg. v. Blandford Justices, Ex parte G. (An Infant) [1967] 1 Q.B. 82; [1966] 2 W.L.R. 1232; [1966] 1 All E.R. 1021, D.C.

Reg. v. Campbell, Ex parte Hoy [1953] 1 Q.B. 585; [1953] 2 W.L.R. 578; [1953] 1 All E.R. 684, D.C.

Reg. v. Clouter and Heath (1859) 8 Cox C.C. 237.

Reg. v. Cole [1965] 2 Q.B. 388; [1965] 3 W.L.R. 263; [1965] 2 All E.R. 29, C.C.A.

Reg. v. Drury (1849) 3 Cox C.C. 544.

Reg. v. Durham Quarter Sessions, Ex parte Virgo [1952] 2 Q.B. 1; [1952] 1 All E.R. 466, D.C.

Reg. v. Essex Justices, Ex parte Final [1963] 2 Q.B. 816; [1963] 2 W.L.R. 38; [1962] 3 All E.R. 924, D.C.

Reg. v. Gore Justices, Ex parte N. (An Infant) [1966] 1 W.L.R. 1522; [1966] 3 All E.R. 991, D.C.

Reg. v. Guest, Ex parte Anthony [1964] 1 W.L.R. 1273; [1964] 3 All E.R. 385, D.C.

Reg. v. McNally [1954] 1 W.L.R. 933; [1954] 2 All E.R. 372, C.C.A.

Reg. v. Miles (1890) 24 Q.B.D. 423.

Reg. v. Riley [1963] 3 All E.R. 949.

Reg. v. Stonnell (1845) 1 Cox C.C. 142.

Rex v. Grant [1936] 2 All E.R. 1156, C.C.A.

Rex v. Harris (1797) 7 Durn. & E. 238.

Rex v. Hertfordshire Justices [1911] 1 K.B. 612, D.C.

Rex v. Norfolk Justices, Ex parte Director of Public Prosecutions [1950] 2 K.B. 558; [1950] 2 All E.R. 42, D.C.

Rex v. Sheridan [1937] 1 K.B. 223; [1936] 2 All E.R. 883, C.C.A.

The following additional cases were cited in argument:

Conlin v. Patterson [1915] 2 I.R. 169.

Reg. v. Huntingdon Justices, Ex parte Simpkin and Coombes (1959) 123 J.P. 166, D.C.

Reg. v. Kent Justices, Ex parte Machin [1952] 2 Q.B. 355; [1952] 1 All E.R. 1123, D.C.

Rex v. London Sessions Appeal Committee, Ex parte Rogers [1951] 2 K.B. 74; [1951] 1 All E.R. 343, D.C.

Rex v. Manchester Justices, Ex parte Lever [1937] 2 K.B. 96; [1937] 3 All E.R. 4, D.C.

Rex v. Marsham, Ex parte Pethick Lawrence [1912] 2 K.B. 362, D.C.

Rex v. Plummer [1902] 2 K.B. 339.

Rex v. West Kent Quarter Sessions Appeal Committee, Ex parte Files [1951] 2 All E.R. 728, D.C.

Wemyss v. Hopkins (1875) L.R. 10 Q.B. 378.

[1971] A.C. 481 Page 483

LORD MACDERMOTT. My Lords, the question for decision in this appeal may be introduced briefly and without going into details. On May 30, 1968, the appellant appeared before the Manchester Juvenile Court on a charge of attempted rape. He consented to be tried summarily and pleaded guilty. Before the end of that day’s hearing, this plea had been accepted, and the magistrates had entered a finding of guilt. The hearing was then adjourned until June 30, for the purpose of inquiry into the appellant’s physical and mental condition. Accepting, as I do, the Divisional Court’s view of the evidence, I can find no fault with the juvenile court’s conduct of the proceedings up to this point.

On the adjourned hearing the appellant was legally represented and his solicitor, having drawn the attention of the court to the appellant’s mental condition and to what were said to be instances of previous spurious confessions on his part, asked that he be allowed to withdraw his plea of guilty and to plead not guilty instead. It is clear that if the court had authority to accede to this request it ought, in the circumstances, to have done so; and it is also clear that that is the course it would have followed had it been satisfied as to its powers in that respect. After argument, however, the court held that it was functus officio and had no such authority. Having reached this conclusion, it proceeded to consider the medical reports and to make a hospital order against the appellant under section 60 of the Mental Health Act 1959.

On January 23, 1969, this ruling was upheld by a Divisional Court (Lord Parker of Waddington C.J., Edmund Davies L.J. and Caulfield J.). The appellant then appealed to your Lordships’ House by leave of the Divisional Court which certified that a point of law of general public importance was involved in its decision. This point was described in the certificate under three heads, but it will suffice if I mention only the first of these as it poses in general terms the question for your Lordships’ consideration. It reads thus:

“Whether a court of summary jurisdiction which has already accepted a plea of guilty to the offence charged is in law debarred from permitting a plea of not guilty to be substituted at any time before passing sentence?”

My Lords, the Divisional Court, basing its conclusion on previous decisions, held that the juvenile court, having accepted a plea of guilty and reached a finding of guilt was functus that part of its adjudication and could not go back upon it. The authorities bearing on this conclusion, which with it enshrine what I may refer to as the “functus doctrine,” must therefore be examined; but before I come to them it is, I think, desirable to consider two broad prefatory questions. The first is whether a decision such as that under appeal is appropriate or adverse to the proper functioning of the judicial process; and the second is whether there is anything in the statutes and regulations governing magistrates’ courts to require or justify such a decision.

As to the first of these questions, the exercise of a complete criminal

[1971] A.C. 481 Page 493

jurisdiction – and I use that expression to exclude special statutory procedures in which guilt is found by one court and punishment awarded by another – naturally falls into two parts, whatever the status of the court concerned. There is the ascertainment of guilt or innocence; and after that there is the sentencing or determination of what should be done with the guilty. In a sense these parts are distinct, and the temporal gap between them has tended of recent times, in certain types of case, to become longer as the need for a closer investigation of the convicted person’s health and background has obtained wider recognition. But that is far from saying that each part stands isolated from and independent of the other. The evidence relevant to the commission of an offence is generally relevant to the sentence. And that part of the hearing which is directed to the sentence may well cast new light on the question of guilt or innocence. I think it is safe to say that this has long been recognised and that the tenor of English law has been against erecting any barrier between these two parts or stages which would place them, as it were, in watertight compartments and so reduce the scope of judicial ascertainment and discretion. There must, of course, be an end to all things and any court becomes functus eventually. But such a platitude does nothing to establish the barrier under discussion which is arbitrary in nature and, in my opinion, prejudicial to the due administration of criminal justice. Every experienced judge knows that, even in uncontested matters, the truth has a habit of emerging in bits and pieces, and that the legal ingredients of the offence charged may not be fully understood by the accused. Pleas of guilty of stealing where there has been no intention to deprive the owner permanently, or of receiving where there has been no guilty knowledge at the time of receipt are but notorious examples of what has happened and can still happen through this sort of ignorance or misunderstanding which, be it noted, may not proclaim itself when the plea is made. The risk of this is certainly not rare enough to be left out of account. Legal aid may reduce it, but it would be rash to assume that it will eliminate such mistakes entirely; and it must also be remembered in this connection that quite a number of modern statutory offences are sufficiently complex in their make-up to confuse both the lay and the learned. Once made, a mistaken plea may be properly accepted and the mistake may never stand revealed. But if, as can happen, the truth comes to light during the second stage of the proceedings, when the question of what to do with the accused is under consideration, why should it not be acted upon and a changed plea of not guilty allowed where the interests of justice so require? There is no good reason for thinking that such a course would create an administrative problem or open the door to a widespread abuse of process. As respects trials on indictment, including trials before justices at quarter sessions, the attitude of the common law on this matter has been clear for generations. Such a change may, at the discretion of the court, be allowed at any time before the case has been disposed of by sentence. On principle I see no reason why this discretionary power should be denied to courts of summary jurisdiction. It is as necessary there as elsewhere if the justices are to be free to do justice while they have seisin of the proceedings.

[1971] A.C. 481 Page 494

For these reasons I would hold that the decision under appeal is not appropriate but adverse to the proper functioning of the judicial process.

Now, as to the second question. Can the decision be justified by statute or regulation? I have been unable to find anything in the material legislation and rules of procedure which could do that. The conjoint effect of (a) the growing tendency, already noted, to adjourn after a finding of guilt with a view to obtaining further information relative to the task of sentencing, and (b) the difficulties, such as they are, of reconstituting the same bench of lay justices for the further hearing, suggested the possibility of some provision to meet such a situation by the adoption of a step by step conception of adjudication with each step regarded as complete in itself. My Lords, I have been unable to discover any provision of the kind. Subsection (6) of section 98 of the Magistrates’ Courts Act, 1952, lays down as the general rule that “the justices composing the court before which any proceedings take place shall be present during the whole of the proceedings. …” But subsection (7) provides for an exception to this. It runs:

“(7) Where the trial of an information is adjourned after the accused has been convicted and before he is sentenced or otherwise dealt with, the court which sentences or deals with him need not be composed of the same justices as that which convicted him; but, where among the justices composing the court which sentences or deals with an offender there are any who were not sitting when he was convicted, the court which sentences or deals with the offender shall before doing so make such inquiry into the facts and circumstances of the case as will enable the justices who were not sitting when the offender was convicted to be fully acquainted with those facts and circumstances.”

That provision, in my view, does nothing to support the decision of the Divisional Court. It does not divide the officium. On the contrary, as it seems to me, it is couched in language which recognises the unity of the proceedings on either side of the adjournment. If, as this enactment acknowledges, it is right that the justices should know what has happened at the first hearing in order to deal justly with the accused at the second, it is hard to understand why they should be debarred from coming to the conclusion, on the strength of what is revealed at the resumed hearing, that despite his plea the accused was not guilty, or else that his guilt was so much in doubt as to justify fresh consideration after a change of plea.

I would therefore answer my second question by saying that there is nothing in the relevant legislation or regulations on which to found the decision under appeal.

That leaves the authorities. I do not propose to enter upon an exhaustive review of all the cases cited in argument. A number of them have little bearing on the present issue. Some turn on whether the plea made should have been accepted as a plea of guilty or not guilty – the “guilty but …” cases; some depend on the meaning to be given to the ambiguous word “conviction”; some seem to touch on the exercise of the alleged discretion rather than on its existence; and some relate to proceedings raising special issues because two courts rather than one

[1971] A.C. 481 Page 495

were involved. At the outset it is helpful to remember that the present is a limited issue. After a properly accepted plea of guilt, have justices power before finally disposing of the case to allow a change of plea in the due exercise of their discretion? It will be convenient to start with the decisions relied upon by the Divisional Court and to work backwards.

The Divisional Court cited two cases. The first of these, in point of time, was Reg. v. Blandford Justices, Ex parte G. (An Infant) [1967] 1 Q.B. 82. That was one of the “guilty but …” cases and the decision to convict on the plea was declared a nullity. However, after referring to Reg. v. Durham Quarter Sessions, Ex parte Virgo [1952] 2 Q.B. 1, and Reg. v. Guest, Ex parte Anthony[1964] 1 W.L.R. 1273, Widgery J., giving the judgment of the court, said at p. 90:

“In my judgment it follows from those two cases, which are in no sense in conflict, that a time comes when the magistrate is functus officio and cannot reconsider or re-open the question of whether the accused’s plea of guilty should be accepted or not. Following the language used in Guest’s case, that point is reached when an unequivocal plea has been made and has been accepted by the magistrate in the sense that the magistrate is satisfied that it is safe to act upon the plea, he being further satisfied that the defendant really intends to put in a plea in that sense.”

The other case cited by the Divisional Court was Reg. v. Gore Justices, Ex parte N. (An Infant)[1966] 1 W.L.R. 1522. The facts there were much akin to those of the present case. Lord Parker of Waddington C.J., delivering the judgment of the court, referred to what Widgery J. had said in Reg. v. Blandford Justices, Ex parte G. (An Infant) [1967] 1 Q.B. 82, on the strength of Reg. v. Guest, Ex parte Anthony [1964] 1 W.L.R. 1273, with apparent approval. But the case seems to have turned on the soundness of the justices’ acceptance of the plea of guilty and their jurisdiction to allow such a plea to be changed subsequently does not appear to have been closely canvassed.

That brings me to the two decisions on which Widgery J. based the views I have quoted from his judgment in Reg. v. Blandford Justices, Ex parte G. (An Infant) [1967] 1 Q.B. 82. In Reg. v. Durham Quarter Sessions, Ex parte Virgo [1952] 2 Q.B. 1 the accused had pleaded guilty before a court of summary jurisdiction to stealing a motor bicycle. Asked if he had anything to say, he replied: “It was a mistake, I thought it was my mate’s cycle. My mate said: ‘Take it home.’ My mate’s bike is identical.” The justices, notwithstanding this statement, let the accused’s plea of guilty stand and sentenced him to six months’ imprisonment. The accused appealed to quarter sessions against both his conviction and sentence. Quarter sessions decided that the justices ought to have entered a plea of not guilty and the case was sent back. The matter was then brought before a Divisional Court (Lord Goddard C.J., Jones and Parker JJ.) which affirmed the ruling of quarter sessions. Now that was another of the “guilty but …” cases and the Divisional Court acted on the view that the accused’s plea was not unequivocal and that the justices entered a plea of guilty when they should have entered a plea of not guilty. The decision does not therefore establish the functus doctrine as

[1971] A.C. 481 Page 496

advanced in this case. Logically it may, as Widgery J. seemed to think, be compatible with it. But in that event the result would appear to be either that justices who wrongly enter a plea of guilty in the first part of the proceedings and find out their error from what transpires in the second part can then do nothing about it; or else that they can go back on their finding of guilt if the plea was equivocal, but not if it was unequivocal. I think this is all too confusing and difficult to be sound. And the confusion becomes worse confounded if, as I am inclined to think may have happened in some of the cases, the “guilty but …” or equivocal factor was only revealed to the court by statements made in mitigation during the sentencing stage of the proceedings. These fine distinctions between what pleas are acceptable and what not, between the equivocal and the unequivocal, between provisional acceptance and final acceptance of the plea made, and between one stage and another of the same proceedings owe much to the introduction of what I have called the functus doctrine and suffice in themselves to cast a grave doubt on its validity.

I come now to the second of the decisions relied upon in Reg. v. Blandford Justices, Ex parte G. (An Infant) [1967] 1 Q.B. 82 – the case of Reg. v. Guest, Ex parte Anthony [1964] 1 W.L.R. 1273. There the accused was charged with being in possession of house breaking implements by night and with assaulting a police officer in the exercise of his duty. He consented to a summary trial and pleaded guilty to each charge. The case was then adjourned to enable a deportation order to be served. At the resumed hearing counsel on behalf of the accused asked that the plea be changed to one of not guilty. The magistrate held he had no power to comply with this request and a Divisional Court (Winn, Fenton Atkinson and Widgery JJ.) sustained his ruling. It may be that this reflected the merits of the case, but the point of the decision is that it approved the functus doctrine with which this appeal is concerned. Before the adjournment the accused’s pleas of guilty had been properly accepted and entries of conviction had been directed. In these circumstances Winn J., who delivered the leading judgment, held, at p. 1278, that certiorari

“… will not go where there has been a conviction in summary proceedings to require any further proceedings to be taken which would be inconsistent with that conviction …”

Fenton Atkinson J. agreed and so did Widgery J., who added, at p. 1278:

“I am quite satisfied that a magistrate cannot entertain an application by an accused person to change his plea once the magistrate has convicted under section 13 (3) of the Magistrates’ Courts Act, 1952.”

Section 13 (3), it will be remembered, provides that if the accused pleads “guilty, the court may convict him without hearing evidence.” Guest’s case, therefore, is very much in point. If its ratio was right this appeal should fail. If it was wrong, the decision in the Gore Justices’ case [1966] 1 W.L.R. 1522 can only be justified on its facts and the decision in this case cannot be justified at all. It is therefore necessary to see on what grounds Guest’s case [1964] 1 W.L.R. 1273 was decided. The first comment here must be that the decision was not based on any analysis of the principles involved but on the authority of a series of four earlier decisions which

[1971] A.C. 481 Page 497

in the view of Winn J. constituted “ample binding authority.” Of these earlier decisions most reliance seems to have been placed on two cases which came before the Court of Criminal Appeal within a few weeks of each other in 1936. The first is Rex v. Sheridan [1937] 1 K.B. 223. In that case the appellant had been convicted at quarter sessions of, inter alia, obtaining credit by fraud. At petty sessions he had been informed of his right to trial by jury, but had consented to be dealt with summarily and had pleaded not guilty. At the close of the hearing on that issue the magistrates announced that they had found the appellant guilty. On the question of sentence certain previous convictions were then proved by a police officer. Having considered this evidence, the magistrates said that they would not deal with the case and committed the appellant for trial at quarter sessions. There the appellant pleaded autrefois convict in respect of the charge mentioned, but this plea was overruled. Before the Court of Criminal Appeal (Lord Hewart C.J., Humphreys and Hilbery JJ.) the submission of the Crown was that a mere conviction would not support a plea of autrefois convict unless the person convicted had also been sentenced. The court held otherwise. Humphreys J., who delivered the judgment, having referred to Reg. v. Blaby[1894] 2 Q.B. 170, in which the word “convicted” in a statute was held to mean “found guilty,” stated that in the opinion of the court that decision was in point. The court accordingly held that, as the justices had found the appellant guilty, they had convicted him in a manner which established the plea of autrefois convict. In Rex v. Grant [1936] 2 All E.R. 1156 the same point arose and was decided in the same way. There the appellant had been convicted by a magistrate on his plea of guilty and not as in Sheridan’s case [1937] 1 K.B. 223. Having received a report on the appellant, the magistrate then changed his mind and decided to send him to quarter sessions. The Court of Criminal Appeal made it clear that magistrates were not debarred from committing an accused person for trial after they had commenced to deal with him summarily, but emphasised that once they had acquitted or convicted the accused this was no longer possible. The court was unable to distinguish Sheridan’s case and again the plea of autrefois convict was upheld.

Before your Lordships issue was joined on whether the cases of Sheridan and Grant were properly decided, the contention against the decisions being that a plea of autrefois convict only lies where there has been a conviction in the broader sense of the word, that is to say, a finding of guilt followed by an adjudication on what should be done with the convicted person by way of punishment, or otherwise. This raised a debatable point, but one which I do not find it necessary to decide in the present appeal. Assuming that these decisions were correct they supply, in my view, no ground whatever for the decision in Guest’s case [1964] 1 W.L.R. 1273. The Court of Criminal Appeal did not purport to examine what I have called the functus doctrine and there is nothing in its judgments to suggest that justices, while retaining seisin of a case are precluded from allowing a change of plea in the exercise of their discretion.

It remains to notice the two other decisions on which Winn J. relied in Guest’s case. The first is Reg. v. Campbell, Ex parte Hoy [1953] 1 Q.B. 585. There a Divisional Court (Lord Goddard C.J., Byrne and

[1971] A.C. 481 Page 498

Gerrard JJ.) had to consider the case of a woman charged with a customs offence who elected to be tried summarily and pleaded guilty. The magistrate convicted her and imposed a prison sentence. Later the same day, on the application of the woman’s solicitor, the magistrate allowed the plea to be altered to one of not guilty and remanded the prisoner on bail. The prosecution then applied for an order prohibiting the magistrate concerned, Miss Sybil Campbell, from proceeding with the charge otherwise than by issuing a committal warrant. The Divisional Court held that the magistrate was functa officio when she allowed the plea to be changed and had therefore no power to do so. In my opinion this case gives no more support than the cases of Sheridan [1937] 1 K.B. 223 and Grant [1936] 2 All E.R. 1156 to the doctrine under discussion. Miss Campbell had heard the case before her fully. She had accepted the plea of guilty and had concluded the second stage of the proceedings which determined the matter by sending the accused to jail. She was in law truly functa officio, and that being so the case affords no guidance on the question in debate here, namely, whether the same conclusion could have been reached after the plea had been accepted but before sentence had been pronounced. The last of the four decisions mentioned by Winn J. in Reg. v. Guest, Ex parte Anthony [1964] 1 W.L.R. 1273, was Reg. v. Essex Justices, Ex parte Final [1963] 2 Q.B. 816. This case, too, seems completely beside the point. There the accused had been charged with permitting the use of a motor vehicle when some of its parts or accessories were in a condition likely to cause danger. The accused appears to have pleaded not guilty. But when all the evidence had been heard the chairman announced the decision of the justices, which was to the effect that the case had been proved and that a fine of £3 would be imposed. The accused’s solicitor then continued the argument, contending that the prosecution had not proved certain ingredients of the charge, whereupon the justices changed their minds and dismissed the information. It was held by a Divisional Court (Lord Parker of Waddington C.J., Gorman and Salmon JJ.) that the justices had no jurisdiction to make this change as they were then functi officio. I do not think there can be any dispute about that conclusion, but it begs the question before your Lordships, for the process of adjudication, however informal it may have been, had been completed and was effective in point of law. I note that in the course of his judgment, Salmon J. said at p. 823, “once the justices have convicted or acquitted, they are functi officio and cannot alter their decision.” I think the learned judge must here have been using the word “convicted” in its wider sense and as including not only the finding of guilt but the subsequent adjudication as to punishment. There is nothing in the context or in the case to suggest that he meant to refer to a finding of guilt and nothing more.

My Lords, I have found it impossible to derive the functus doctrine, as accepted by the Divisional Court, from any of the authorities cited in its support. In my opinion Guest’s case [1964] 1 W.L.R. 1273 was wrongly decided in point of law and, in so far as it purports to follow that decision, I would say the same of the Gore Justices case [1966] 1 W.L.R. 1522. Here I would like to refer to one other decision which was brought to your Lordships’ attention by counsel for the appellant and which seems, unfortunately as I think, to have escaped the notice it deserves in the

[1971] A.C. 481 Page 499

authorities I have reviewed. It is Rex v. Norfolk Justices, Ex parte Director of Public Prosecutions[1950] 2 K.B. 558, an application for an order of mandamus which came before a Divisional Court consisting of Lord Goddard C.J. and Humphreys, Byrne, Morris and Finnemore JJ. There an accused person had appeared before a court of summary jurisdiction on charges of seven bankruptcy offences. He was convicted on all these charges and then asked for six similar offences to be taken into consideration. The justices thereupon committed him to quarter sessions for sentence. This committal was, for reasons which are not now material, invalid and quarter sessions made no order except to discharge the accused’s bail. Fresh summonses were then taken out calling on the accused to come before the justices for sentence in respect of the offences of which he had been convicted. On the return day the justices refused to proceed further and the Director of Public Prosecutions then caused mandamus proceedings to be taken against them. The main argument was simple. The Attorney-General submitted that as the committal was a nullity the proceedings before the justices had not concluded and they were therefore not functi officio. Counsel for the accused, on the other hand, argued that the cases could not be sent back for sentence as the justices had given judgment and were functi officio. The Divisional Court unanimously decided that the justices were not functi officio. Lord Goddard, after examining what a judgment means, summarised his conclusion, thus, at p. 569:

“… there must have been something which puts an end to the case; there must be a final adjudication; and there has been no final adjudication in the present case. Therefore in my opinion the justices were not functi officio.”

That, in my view, remains an acceptable proposition and one which points clearly to the principle that should govern this appeal.

Such are the reasons which have led me to hold that the appeal should be allowed and the hospital order quashed.

LORD MORRIS OF BORTH-Y-GEST. My Lords, when on May 30, 1968, the appellant, then aged 16, appeared before the juvenile court in the City of Manchester he consented to summary trial. He pleaded guilty to a serious offence alleged to have been committed on May 18, 1968. He was not legally represented. The court inquired as to the whereabouts of his parents and was informed that he was in the care of the Manchester City Council. An officer of the children’s department (in whose charge the appellant was) was present on behalf of the appellant. Before the appellant consented to summary trial the chairman of the court explained to him the different forms of trial and advised him to consult the officer of the children’s department before he said anything. Such consultation took place before the appellant consented to summary trial and pleaded guilty. The appropriate procedure appears to have been followed which enables a court to try a young person summarily for an indictable offence.

The appellant had been arrested on May 29 and on that date had signed a confession. After the facts of the case had been outlined to the court the appellant was asked whether he had understood. He said that

[1971] A.C. 481 Page 500

he had. He was given an opportunity (of which he did not avail himself) to ask questions and to say anything that he wished to say. When the stage came for the court to be informed about the appellant they were given a history of his having been in the care of the local authority since babyhood, of his having been in a mental hospital and of his having been transferred early in May, 1968, to a hostel for subnormal children. In the Divisional Court there was a conflict of testimony as to whether a further circumstance (and one of high relevance) was brought to the attention of the court, viz., that the appellant was one who was in the habit of making spurious confessions. The Divisional Court accepted that the court was not made aware of that circumstance. The chairman of the court had deposed that had the court been so made aware they would not have accepted the appellant’s plea of guilty but would have directed a change of plea. In The result the juvenile court remanded the appellant in order that a medical report should be obtained. The procedure indicated by section 14 (3) of the Magistrates’ Courts Act, 1952, was followed. That subsection is as follows:

“14. – (3) A magistrates’ count may, for the purpose of enabling inquiries to be made or of determining the most suitable method of dealing with the case, exercise its power to adjourn after convicting the accused and before sentencing him or otherwise dealing with him; but, if it does so, the adjournment shall not be for more than three weeks at a time.”

The remand was for a period of three weeks. In the register of the court the minute of adjudication recorded that the appellant was “found guilty” and was remanded to Risley for a period of three weeks. The period of three weeks would expire on June 20. Before that date (i.e., on June 6) an application was made by a legal representative of the appellant for the plea of guilty to be set aside and a plea of not guilty to be entered. No decision was then made. The matter was adjourned to June 20. On that date, after argument and after a consideration of certain cases which were binding on the court, the application was refused. The magistrates would have wished to accede to it and, having regard to what they were then told and having regard to various circumstances which later were set out in affidavits (but which need not for present purposes be recounted), it is clear that it would have been very desirable to allow a withdrawal of the plea of guilty so that there should be a hearing at which the facts could be investigated. The ground of the magistrates’ decision was that, inasmuch as a conviction had been entered, it was not then in their power, and that it had not, after the conclusion of the proceedings on May 30, been in their power to allow the plea of guilty to be withdrawn and a plea of not guilty to be substituted.

Having regard to the authorities no criticism can be made of the magistrates for having decided as they did. Nor do I think that they erred in their view as to the events of May 30. The appellant had stated clearly that he pleaded guilty. He had done so after consultation with someone who was acting as his parent. The magistrates heard the facts as outlined by counsel for the prosecution. The facts were not challenged and nothing was said which made the magistrates feel that it was unsafe to accept the plea of guilty. In the result, though the court did not at any particular

[1971] A.C. 481 Page 501

stage on May 30 indicate that they formally accepted the plea, it is a reasonable and natural inference from the events that the court accepted the plea when the case was adjourned for a period of three weeks and when the court “after convicting” the appellant “and before sentencing him” remanded him in custody so that medical reports should be obtained. The remand was made for the purpose of “determining the most suitable method of dealing with the case” (see Magistrates’ Courts Act, 1952, s. 14 (3)).

The case is not, therefore, one in which there was an ambiguous or equivocal plea or one in which there were circumstances casting doubt on the safety of accepting a plea. Though reference is often made to the “acceptance” of a plea there is no necessity for any formal pronouncement. All that is denoted by such an “acceptance” is that a court is proceeding to consider what is the appropriate course to take in regard to a person who, as the court thinks, with full appreciation of what he is doing and with adequate understanding of what is involved in and what are the ingredients of a charge preferred against him, has fully and freely acknowledged and confessed to the court that he is guilty of the charge. That the court is fully entitled to accept a plea is made clear by section 13 (3) of the Magistrates’ Courts Act, 1952, which provides that: “If the accused pleads guilty, the court may convict him without hearing evidence.” The words “convict” and “conviction” in the Act are not always used with the same meaning. If, however, the word “convict” in this subsection is used in the sense of a finding of guilt (as opposed to a finding of guilt coupled with the making of some order) the question that is now raised is whether the fact that there is an acceptance of a plea of guilty made by an accused (which may amount to “convicting the accused” – see section 14 (3)) – prevents a court from allowing a withdrawal of the plea at any time before sentence.

If, before the court has completed its task in regard to the case, an application to withdraw the plea is made and if it is made for reasons which the court deems valid and which perhaps it had previously had no opportunity of considering, is the court powerless to accede to it? It would be lamentable it that were so. The court might feel that having regard to the reasons advanced it would be wholly wrong to hold a person to some previous acknowledgment of guilt. The desire of any court must be to ensure, so far as possible, that only those are punished who are in fact guilty. The duty of a court to clear the innocent must be equal or superior in importance to its duty to convict and punish the guilty. Guilt may be proved by evidence. But also it may be confessed. The court will, however, have great concern if any doubt exists as to whether a confession was intended or as to whether it ought really ever to have been made. When, in the present case, the court, on June 20, heard the reasons for the application made to them, they felt, and rightly felt, that the proper course in the interests of justice would be to accede to it. It would be a grave defect in our law and system if there is some rule which thwarts the course which the interests of justice prompt.

If magistrates are trying a case summarily they will not have completed their duty in regard to the case until they either (a) dismiss the case or (b) find the accused guilty and deal with him on that basis. The finding of guilt may involve reaching a conclusion in regard to disputed or contested

[1971] A.C. 481 Page 502

facts. It may involve proceeding on the basis of or “accepting” a confession made in court by way of an unequivocal and unambiguous plea of guilty which so far as the court can tell was intentionally made with full appreciation of all that it involved. But if there is a finding of guilt the court will only have advanced part of the way in the discharge of its duty. There must be a separation in time between the one part of the duty and the other part. If the court has to consider what course to follow in regard to someone who is found to be guilty it will be relevant and generally necessary to have information which will include information as to previous convictions. It would be quite wrong for the court to have such information before the time when there is a finding of guilt. But after such time and before the court has disposed of the case by making whatever order it deems appropriate the court is still engaged upon its duty. Applying this reasoning to the present case it seems to me that it is wrong to say that, at the end of the hearing on May 30, the magistrates were functi officio. They were not. They still had an important part of their duty to perform. It was because they had such a duty that they remanded the appellant in custody for three weeks. They are not to be criticised for accepting the plea of guilty on the basis of which they were going to decide what to do with the person who had pleaded guilty. They were warranted in what they did. But on June 6, and again on June 20, the case was still before them. The entry made in the register as to what had taken place on May 30 (whether made impliedly or expressly by their authority) could have no other effect than that of recording the events of May 30. The entries then made have the effect of confirming that the magistrates had further duties to discharge and that they were not functi officio. When, therefore, on June 6, and June 20, the appellant made the request to withdraw his plea it was, in my view, open to the magistrates, if for good reasons they saw fit, to accede to the request.

The word “conviction” may sometimes be used to denote merely a finding of guilt and sometimes to denote such a finding followed by an appropriate order. The language of section 14 (3) of the Act of 1952 illustrates use in the former sense. A magistrates’ court may in order to determine “the most suitable method of dealing with the case” exercise its power to adjourn “after convicting” the accused and before sentencing him or otherwise dealing with him. So “the case” is merely adjourned. It is still before them. The magistrates are clearly not functi officio. They will have reached a stage in their task but I see no reason why that stage should be regarded as having been finally reached or why steps in reaching it could not for good and valid reasons be retraced. Section 26 (1) of the Act likewise illustrates that before the “method of dealing with” a person is decided upon “the case” may be adjourned after the court is satisfied that “the offence has been committed.” In section 56 of the Criminal Justice Act, 1967, may be found an illustration of the use of the word “convicted” as denoting a finding of guilt.

On a trial on indictment it has been accepted that after arraignment but before sentence a plea may – in the discretion of the court – be withdrawn (see Reg. v. McNally [1954] 1 W.L.R. 933 and Reg. v. Clouter and Heath (1859) 8 Cox 237). A different rule has been held to apply to magistrates’ courts. This was so decided in Reg. v.

[1971] A.C. 481 Page 503

Guest, Ex parte Anthony [1964] 1 W.L.R. 1273. In that case a magistrate in a situation comparable with that in the present case (though on very different facts) had held that he had no power to allow a change of plea. That view was upheld in the Queen’s Bench Division on an application for orders of certiorari and mandamus. The applicant had been legally represented before the magistrate: he had consented to summary trial and had pleaded guilty. The magistrate had accepted the plea and had directed an entry in the register. There was a remand under the power given by section 14 (3) of the Magistrates’ Courts Act, 1952, and section 8 (2) of the Commonwealth Immigrants Act, 1962. It was laid down in the Divisional Court that a magistrate cannot entertain an application by an accused person to change his plea once the magistrate has convicted under section 13 (3) of the Act of 1952. I cannot accept this conclusion. Support for it was said to be found in Rex v. Sheridan [1937] 1 K.B. 223. But no question of the withdrawal of a plea arose in Sheridan’s case. In that case there had been a plea of not guilty, but after hearing evidence the magistrates found the accused guilty. When they learned of his previous convictions they did not pass sentence but committed him for trial at quarter sessions. At such trial he raised a plea of autrefois convict. That plea was overruled and he was convicted by quarter sessions. That conviction was set aside by the Court of Criminal Appeal who held that in order to support a plea of autrefois convict it is not necessary that a conviction should have been followed by sentence: they held that the plea of autrefois convict should have been accepted at sessions. I do not find the case very helpful for present purposes. Nor was it a very satisfactory case. It seemed doubtful whether the correct procedure had been followed before summary trial had been embarked upon. It may be that the case could have been decided on the basis that once magistrates had made a finding in the case, they had no jurisdiction (as the statutory provisions then stood) to commit to quarter sessions. But in any event it seems to me to be unnecessary for present purposes to consider whether Sheridan’s case [1937] 1 K.B. 223 was rightly decided or to consider whether a conviction in the narrow sense (i.e., of a finding of guilt not followed by some appropriate order) is sufficient to support a plea of autrefois convict. Sheridan’s case was followed and applied in Rex v. Grant [1936] 2 All E.R. 1156. Again, in that case (where there had been a plea of guilty before a magistrate) no question arose concerning the withdrawal of a plea. In that case there was a committal for trial which was quite unwarranted. Both cases were referred to without disapproval by Lord Goddard C.J. in his judgment in Rex v. Norfolk Justices, Ex parte Director of Public Prosecutions [1950] 2 K.B. 558. In that case magistrates decided to convict and then decided to commit to quarter sessions for sentence. That committal, however (for reasons which need not be elaborated), was invalid. Quarter sessions quite properly declined to deal substantively with the case. It was held that a mandamus must issue directing the justices (who had convicted) to proceed to impose a sentence. They were not functi officio. There had been no judgment or final adjudication. Again, in that case no question arose as to the withdrawal of a plea but the case is important as showing that (leaving out of account the procedure where section 29 of the Act of 1952 is applicable and is properly

[1971] A.C. 481 Page 504

followed) magistrates who try a case are not functi officio until they have passed a sentence or have otherwise finally adjudicated.

I do not think either Sheridan’s case [1937] 1 K.B. 223 or Grant’s case [1936] 2 All E.R. 1156 compelled the decision in Guest’s case. In neither of those cases did the point arise whether a plea of guilty could be withdrawn after acceptance of it and before a case is disposed of by a sentence or by some appropriate order. After such a disposal of a case a magistrate would be functus officio: see Reg. v. Campbell, Ex parte Hoy [1953] 1 Q.B. 585.

The facts which gave rise to the later case of Reg. v. Gore Justices, Ex parte N. (An Infant) [1966] 1 W.L.R. 1522 were considerably similar to those in the present case. Magistrates who had accepted pleas of guilty which they regarded as unequivocal remanded an accused for a report; convictions were recorded; at the resumed hearing there was an application to be allowed to change the pleas to pleas of not guilty. The magistrates held that they had no discretion to accede to the application. Their ruling was upheld in the Queen’s Bench Division and Guest’s case [1964] 1 W.L.R. 1273 was followed. For the reasons which I have already given I consider that this decision was wrong.

The question now being considered did not arise in Reg. v. Blandford Justices, Ex parte G. (An Infant) [1967] 1 Q.B. 82 but it follows that I cannot agree with that part of the judgment in that case which endorsed and summarised the decision in Guest’s case [1964] 1 W.L.R. 1273.

In regard to the specific points of law which were submitted for our decision I consider that a court of summary jurisdiction which has accepted a plea of guilty to the offence charged is not in law debarred from permitting (at any time before passing sentence) a plea of not guilty to be substituted. It follows that on the facts found it was open to the Manchester City Juvenile Court on June 6 and 20, 1968, to permit the appellant to withdraw his plea of guilty and to substitute therefor a plea of not guilty.

I would allow the appeal.

LORD GUEST. My Lords, I have had the advantage of reading the opinion of my noble and learned friend, Lord Reid, with which I agree.

I would allow the appeal.

LORD UPJOHN. My Lords, the appellant appeals to your Lordships’ House by leave of a Divisional Court of the Queen’s Bench Division who have certified that the following questions are of general public importance and fit for consideration by this House:

“1.     Whether a court of summary jurisdiction which has already accepted a plea of guilty to the offence charged is in law debarred from permitting a plea of not guilty to be substituted at any time before passing sentence.

“2.     Whether the discretion of a court of summary jurisdiction to allow a change of plea is different from that exercised by a court of record.

“3     Whether on the facts found it was open to the Manchester City Juvenile Court on June 6, 1968, to permit the defendant to withdraw his plea of guilty of the offence charged which had been given and

[1971] A.C. 481 Page 505

entered on May 30, 1968, and to substitute therefor a plea of not guilty.”

The relevant facts are not in dispute. On May 30, 1968, the appellant, then aged 16, was charged before the juvenile court with attempted rape. He pleaded guilty. There is an unhappy dispute as to what the magistrates were told on that day by the officer of the children’s department of the Lancashire County Council in whose charge the appellant was and Miss Heilbron for him does not seek to challenge the conclusion of the Divisional Court in preferring the evidence of the chairman and deputy clerk of the court, respectively, to that of the children’s officer, but in my opinion it is really irrelevant.

It is conceded that at the conclusion of the hearing on May 30, the magistrates by their conduct accepted the appellant’s plea of guilty which had been provisionally accepted earlier and was accepted as a final and unequivocal plea; and a conviction was recorded. The appellant was remanded for a medical report until June 20.

On that day the appellant, previously unrepresented, was legally represented by a solicitor. He applied for the plea of guilty and finding of guilt on May 30 to be removed and for the court to accept an amended plea of not guilty. The magistrates refused to accept an amended plea on the ground that they were functi officio and they ordered the finding of guilt to stand.

My Lords, I turn to the first question which may, I think, be better stated by asking whether a court of summary jurisdiction which has unequivocally accepted a plea of guilty is functus officio so that an amended plea of not guilty cannot be accepted although sentence has not yet been passed.

Certain matters are quite clear:

(1)     Summary jurisdiction courts are the creatures of statute, but no statute has been referred to which bears on this question.

(2)     The question whether a plea of guilty has or has not been formally recorded in the record of convictions is for relevant purposes quite immaterial; that is a purely administrative act. 

(3)     In the High Court and quarter sessions it is clear that the court is not functus officio after a plea of guilty or even a finding of guilty by a jury but an amended plea of guilty may be accepted until sentence has been passed, for only then is the judgment of the court complete. (See Reg. v. Clouter and Heath (1859) 8 Cox C.C. 237; Rex v. Plummer [1902] 2 K.B. 339; Reg. v. McNally [1954] 1 W.L.R. 933.)

My Lords, the rule in the High Court and at quarter sessions seems very sound and based upon common sense and justice. The court must continue to exercise its jurisdiction over the whole case until the judgment of the court; and there can be no ground in law or common sense which requires a court to become functus officio as to part of its jurisdiction, namely, the finding of guilt, during the hearing of the case.

How, then, has this division of functions come about in the case of a court of summary jurisdiction?

[1971] A.C. 481 Page 506

Unfortunately it all stems from a misunderstanding of the word “conviction” in the case of Rex v. Sheridan [1937] 1 K.B. 223. The primary meaning of the word “conviction” denotes the judicial determination of a case; it is a judgment which involves two matters, a finding of guilt or the acceptance of a plea of guilty followed by sentence. Until there is such a judicial determination the case is not concluded, the court is not functus officio and a plea of autrefois convict cannot be entertained. This has been the law from the earliest times: see Hale’s Pleas of the Crown (1778), Vol. 2, ch. 32, p. 251, and it is equally applicable in a court of summary jurisdiction (see Rex v. Harris (1797) 7 Durn. & E. 238).

In two cases in the first half of the nineteenth century Cresswell J. made this very plain: see Reg. v. Ackroyd and Jagger (1843) 1 Car. & Kir. 158, and in Burgess v. Boetefeur, 7 Man. & G. 481, Cresswell J. expanded what he had said in Ackroyd’s case. See also Coleridge J. in Reg. v. Drury(1849) 3 Cox C.C. 544, 545. The principle was summed up very neatly by Patteson J. in Reg. v. Stonnell (1845) 1 Cox C.C. 142. The Act 7 & 8 Geo. 4, c. 28, s. 11, provided that a certificate for a previous conviction for felony need contain only “the substance and effect” of the indictment and conviction for the previous felony. Patteson J. said of the words substance and effect “that they must mean not only the fact of the conviction by the jury, but also the sentence of the court, for till judgment there is no perfect conviction.” Put in another way, there is no decision until sentence, see Reg. v. Essex Justices, Ex parte Final [1963] 2 Q.B. 816.

But the word “conviction” is used also in a secondary sense, that is, to express a verdict of guilty or acceptance of a plea of guilty before the adjudication which is only completed by sentence. Not only is the word used frequently in this sense in many judgments, but also in many places in statutes dealing with these matters. As Tindal C.J. said in Burgess’s case, 7 Man. & G. 481, 504: “The word ‘conviction’ is undoubtedly verbum equivocum. It is sometimes used as meaning the verdict of a jury, and at other times, in its more strictly legal sense, for the sentence of the court.”

Mr. Hodgson for the respondents drew our attention to a number of sections in the Magistrates’ Courts Act, 1952, where the word “conviction” was used in its primary sense of an adjudication upon the whole matter and to other sections where it was used in the sense of verdict. Indeed, in section 126 (3) it is used in the one sense and in section 126 (9) in the other sense.

So, too, in the Coinage Offences Act, 1861, the word “conviction” was used in its secondary sense. This was clearly pointed out by Hawkins J. in Reg. v. Blaby [1894] 2 Q.B. 170, 171 and 172, but for the purposes of that case it was not necessary that there should have been a judgment.

In Sheridan’s case [1937] 1 K.B. 223 the magistrate proceeded to deal with the matter in a summary way and he found the accused guilty, but he then decided that it was too serious for him to deal with and, as then there was no procedure whereby he could send the matter to sessions for sentence, he committed the accused for trial. The accused came before London Sessions and pleaded autrefois convict. The matter came before the Divisional Court where it was urged by well-known counsel for the

[1971] A.C. 481 Page 507

prosecution that there was no conviction for the purposes of the plea but he did not cite the earlier cases which I have mentioned and referred only to Reg. v. Blaby [1894] 2 Q.B. 170. Unfortunately the Divisional Court misunderstood that case and the use of the word “conviction” in its secondary sense, and sustained the plea of autrefois convict. This was contrary to all earlier authority and cannot be regarded as stating the law correctly, though it may well be that the actual decision can be supported on other grounds.

Sheridan’s case [1937] 1 K.B. 223 was very shortly afterwards followed by Rex v. Grant [1936] 2 All E.R. 1156, where the magistrates accepted a plea of guilty but then committed the accused for trial, and it was held that the plea of autrefois convict must succeed.

These cases lead understandably enough, in order to do justice to the accused, to some rather artificial practices such as accepting a plea of guilty provisionally, as explained by Widgery J. in Reg. v. Blandford Justices [1967] 1 Q.B. 82; or in the “guilty but …” cases, an expression used by Lord Goddard C.J. in Reg. v. Durham Quarter Sessions, Ex parte Virgo [1952] 2 Q.B. 1 to describe the type of case where the accused pleaded guilty but then or at some later stage of the trial showed that he misunderstood the nature of the plea for his explanation showed that he should have pleaded not guilty.

But the logical conclusion to the reasoning of Sheridan’s case [1937] 1 K.B. 223 was that not only could the accused plead autrefois convict but that he could not thereafter be permitted to withdraw his plea. And so it was interpreted in Reg. v. Guest, Ex parte Anthony [1964] 1 W.L.R. 1273, where the court felt driven to reach the conclusion that the magistrate was functus officio as to the finding of guilt but not so as to sentence; and so in Reg v. Gore Justices, Ex parte N. (An Infant) [1966] 1 W.L.R. 1522.

My Lords, it seems to me clear that the law plainly took the wrong turning in Sheridan’s case[1937] 1 K.B. 223. The court, whether High Court, quarter sessions or a court of summary jurisdiction, retains full jurisdiction over all matters before it until sentence, that is, until the final adjudication of the matter; and the reasoning in Sheridan’s case and the cases of Grant [1936] 2 All E.R. 1156; Guest [1964] 1 W.L.R. 1273, and Gore Justices [1966] 1 W.L.R. 1522, which followed that reasoning must be treated as overruled. In future it will be quite unnecessary to accept a provisional plea or to resort to the “guilty but …” artifice. If the court upon all the facts before it, thinks it is proper to accept a plea of guilty then the court may permit that plea to be withdrawn and a plea of not guilty accepted at a later stage up to sentence, that is, until the complete adjudication of conviction.

But my Lords, it is hardly necessary to add that this discretionary power is one which should only be exercised in clear cases and very sparingly. I would only add that your Lordships have not had to consider the complications caused by the statutory power of magistrates to send cases to a higher court for sentence – see, for example, Reg. v. Riley [1963] 3 All E.R. 949 and I express no opinion thereon.

So I would answer the first question in the negative.

So I turn to the second question. This has not been argued before

[1971] A.C. 481 Page 508

your Lordships so I shall content myself with saying that I can see no reason, as at present advised, why there should be any difference.

As to the third question I would answer it in the affirmative.

For these reasons I would allow this appeal.

Appeal allowed.

Solicitors: Adam Burn & Metson for Conn, Goldberg & Co., Manchester; Sharpe, Pritchard & Co., for D. S. Gandy, Manchester.

J. A. G

CHAN CHING-CHI v THE QUEEN
3 June, 1965

Appellate Jurisdiction

AJ

(Criminal Appeal No. 261 of 1965)

Citations:
[1965] HKLR 598

Presiding Judges:
Huggins, J.

Phrases:
Criminal law and procedure – Criminal law – dangerous drugs – unlawful possession – plea of guilty – appeal against conviction out of time permitted – doubtful whether plea was unequivocal – appeal allowed – trial de novo

Facts:
The appellant, a first offender, had pleaded guilty to possession of dangerous drugs and sentenced by a magistrate. He appealed for a review of sentence which was refused. He appealed against sentence.

In support of his appeal he urged his innocence.

The Court granted leave to appeal out of time against conviction.

Held:

1. Although the appellant admitted the facts outlined by the prosecutor, there was no admission that he knew that the bags in his possession contained dangerous drugs;

2. The presumption of knowledge under section 15 of the Dangerous Drugs Ordinance, Cap. 134, was rebuttable;

3. There was some doubt whether the appellant appreciated that knowledge was an essential ingredient of the offence;

4. To eliminate the possibility of injustice it was desirable for a trial de novo.

Appeal allowed, new trial ordered.

Counsel In The Case:
Appellant in person.
N. R. Macdougall, Crown Counsel, for the Crown.

Cases Cited in the Judgement:
R. v. King’s Lynn Justices, ex parte Fysh, [1964] Crim.L.R. 143.
R. v. McNally, [1954] 2 All E.R. 372.
R. v. West Kent Quarter Sessions, ex parte Files, [1951] 2 All E.R. 728.

Details of Judgment:

Huggins, J.:-

HKLR 599

The appellant, a first offender, was sentenced to two and a half years’ imprisonment for unlawful possession of one ounce of diacetylmorphine hydrochloride. He appeals against sentence. In fact five days after the hearing he applied to the learned magistrate for a review of sentence but no review was allowed. The ground of the refusal to grant a review was that the ground of the application was one which did not commend itself to the learned magistrate, namely, that the appellant alleged he was not in possession of the drugs at all. The magistrate said that there had been an unequivocal plea of guilty and he was convinced that the application was merely a consequence of the appellant’s having received a greater sentence than he had hoped for. In his reasons and findings the learned magistrate has set out the well-known English cases of R. v. King’s Lynn Justices Ex parte Fysh ([1964] Crim. L.R. 143), the R. v. West Kent Quarters Sessions, Ex parte Files ([1951] 2 All ER 728), and the R. v. McNally ([1954] 2 All ER 372) as the basis of his decision.

Before me the appellant again urged his innocence in support of his appeal against sentence and I thought it right to give him leave to appeal out of time against his conviction so that I might consider the matter. The authorities cited by the learned magistrate are very clear but there is one aspect of this case which has caused me some concern. The charge, as I say, was unlawful possession of dangerous drugs and “possession” is a concept which causes difficulty even on occasions to lawyers. The magistrate has very reasonably emphasized that the appellant admitted the facts outlined by the prosecutor but, as recorded, they show only that two bags containing drugs were found in his pocket and that when cautioned he asked for a chance. There was no admission that he knew what the bags contained. Of course by virtue of s.15 of the Dangerous Drugs Ordinance possession of the bags would create a presumption that he knew the nature of the contents but it is a presumption which could be rebutted. The question is whether the appellant appreciated that knowledge was an essential ingredient of the offence. He may well have done so but what *600 he said upon the application for a review makes it just possible that all he meant to admit at the original hearing was that he had possession of the bags without knowing the contents. That would not be an unequivocal plea of guilty. Whether he would have been believed had he given evidence on the lines of his statement upon the review may be questionable but I cannot say that must have been disbelieved. The case is a doubtful one and do not criticize the learned magistrate for the view he took. Nevertheless, it is, as I have indicated, just possible that injustice could result and I think it would be desirable to put the matter beyond doubt by ordering a trial de novo. The appeal is allowed accordingly and in the circumstances J say nothing about the sentence which was imposed.